PN 2
22 March 2006
Income tax allowances, National Insurance Contributions, Child and Working Tax Credit rates 2006-07 and other rates
Rates and allowances for Income Tax, National Insurance Contributions the Working and Child Tax Credits, Child Benefit/Guardian’s Allowance, fuel duties, alcohol duties, vehicle excise duties and stamp duty land tax are set out below.
Income tax, capital gains tax, and inheritance tax
| £ per year (unless stated) | 2005-06 | Change | 2006-07 |
| Income tax personal and age-related allowances | |||
| Personal allowance (age under 65) | £4,895 | +£140 | £5,035 |
| Personal allowance (age 65-74) | £7,090 | +£190 | £7,280 |
| Personal allowance (age 75 and over) | £7,220 | +£200 | £7,420 |
| Married couple's allowance* (aged less than 75 and born before 6th April 1935) | £5,905 | +£160 | £6,065 |
| Married couple's allowance* (age 75 and over) | £5,975 | +£160 | £6,135 |
| Married couple's allowance* - minimum amount | £2,280 | +£70 | £2,350 |
| Income limit for age-related allowances | £19,500 | +£600 | £20,100 |
| Blind person’s allowance | £1,610 | +£50 | £1,660 |
| Capital gains tax annual exempt amount | |||
| Individuals etc. | £8,500 | +£300 | £8,800 |
| Most trustees | £4,250 | +£150 | £4,400 |
| Inheritance tax threshold | £275,000 | +£10,000 | £285,000 |
| Pension schemes allowances | |||
| Annual Allowance | N/A | N/A | £215,000 |
| Lifetime Allowance | N/A | N/A | £1,500,000 |
*Married couple's allowance is given at the rate of 10 per cent.
Income tax: taxable bands
| £ per year | 2005-06 | 2006-07 |
| Starting rate: 10%* | £0-£2,090 | £0-£2,150 |
| Basic rate: 22%* | £2,091-£32,400 | £2,151-£33,300 |
| Higher rate: 40%* | Over £32,400 | Over £33,300 |
* The rate of tax applicable to savings income in Section 1A ICTA 1988 remains at 20 per cent for income between the starting and basic rate limits. The rates applicable to dividends are 10 per cent for income up to the basic rate limit and 32.5 per cent above that.
Corporation tax on profits
| £ per year (unless stated) | 2005-06 | 2006-07 |
| Starting rate: 0% | £0 – £10,000 | N/A* |
| Marginal relief | £10,001 – £50,000 | N/A* |
| Small companies’ rate: 19% | £50,001–£300,000 | £0-£300,000 |
| Marginal relief | £300,001–£1,500,000 | £300,001 - £1,500,000 |
| Main rate: 30% | £1,500,001 or more | £1,500,001 or more |
| Non-corporate distribution rate | 19% | N/A* |
*The 2005 Pre-Budget Report announced that the starting rate and non-corporate distribution rate would be replaced with a single banding for small companies set at the existing small companies’ rate.
National insurance contributions
| £ per week (unless stated) | 2005-06 | Change | 2006-07 |
| Lower earnings limit, primary class 1 | £82 | +£2 | £84 |
| Upper earnings limit, primary class 1 | £630 | +£15 | £645 |
| Primary threshold | £94 | +£3 | £97 |
| Secondary threshold | £94 | +£3 | £97 |
| Employees’ primary class 1 rate between primary threshold and upper earnings limit | 11% | - | 11% |
| Employees’ primary class 1 rate above upper earnings limit | 1% | - | 1% |
| Employees’ contracted-out rebate | 1.6% | - | 1.6% |
| Married women’s reduced rate between primary threshold and upper earnings limit | 4.85% | - | 4.85% |
| Married women’s rate above upper earnings limit | 1% | - | 1% |
| Employers’ secondary Class 1 rate above secondary threshold | 12.8% | - | 12.8% |
| Employers’ contracted-out rebate, salary-related schemes | 3.5% | - | 3.5% |
| Employers’ contracted-out rebate, money-purchase schemes | 1% | - | 1% |
| Class 2 rate | £2.10 | - | £2.10 |
| Class 2 small earnings exception | £4,345 per year | £120 per year | £4,465 per year |
| Special Class 2 rate for share fishermen | £2.75 | - | £2.75 |
| Special Class 2 rate for volunteer development workers | £4.10 | +£0.10 | £4.20 |
| Class 3 rate | £7.35 | +£0.20 | £7.55 |
| Class 4 lower profits limit | £4,895 per year | +£140 per year | £5,035 per year |
| Class 4 upper profits limit | £32,760 per year | +£780 per year | £33,540 per year |
| Class 4 rate between lower profits limit and upper profits limit | 8% | - | 8% |
| Class 4 rate above upper profits limit | 1% | - | 1% |
Working and Child Tax Credits rates
| £ per year (unless stated) | 2005-06 | Change | 2006-07 |
| Working Tax Credit | |||
| Basic element | £1,620 | +£45 | £1,665 |
| Couple and lone parent element | £1,595 | +£45 | £1,640 |
| 30 hour element | £660 | +£20 | £680 |
| Disabled worker element | £2,165 | +£60 | £2,225 |
| Severe disability element | £920 | +£25 | £945 |
| 50+ Return to work payment (16-29 hours) | £1,110 | +£30 | £1,140 |
| 50+ Return to work payment (30+ hours) | £1,660 | +£45 | £1,705 |
| Childcare element of the Working Tax Credit | |||
| Maximum eligible cost for one child | £175 per week | - | £175 per week |
| Maximum eligible cost for two or more children | £300 per week | - | £300 per week |
| Percentage of eligible costs covered | 70% | +10% | 80% |
| Child Tax Credit | |||
| Family element | £545 | - | £545 |
| Family element, baby addition | £545 | - | £545 |
| Child element | £1,690 | +£75 | £1,765 |
| Disabled child element | £2,285 | +£65 | £2,350 |
| Severely disabled child element | £920 | +£25 | £945 |
| Income thresholds and withdrawal rates | |||
| First income threshold | £5,220 | - | £5,220 |
| First withdrawal rate (per cent) | 37% | - | 37% |
| Second income threshold | £50,000 | - | £50,000 |
| Second withdrawal rate (per cent) | 6.67% | - | 6.67% |
| First threshold for those entitled to Child Tax Credit only | £13,910 | +£245 | £14,155 |
| Income disregard | £2,500 | +£22,500 | £25,000 |
Child Benefit and Guardian’s Allowance rates from 10 April 2006
| £ per week | 2005-06 | Change | 2006-07 |
| Eldest/Only Child | £17.00 | +£0.45 | £17.45 |
| Other Children | £11.40 | +£0.30 | £11.70 |
| Eldest/Only Child (Lone Parent Rate) | £17.55 | - | £17.55 |
| Guardian’s Allowance | £12.20 | +£0.30 | £12.50 |
Stamp taxes and duties
Transfers of land and buildings (consideration paid)
| Rate | Residential in disadvantaged areas |
Residential outside disadvantaged areas |
Non-residential |
| Total value of consideration | |||
| Zero | £0 - £150,000 | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £150,000 - £250,000 | Over £125,000 - £250,000 | Over £150,000 - £250,000 |
| 3% | Over £250,000 - £500,000 | Over £250,000 - £500,000 | Over £250,000 - £500,000 |
| 4% | Over £500,000 | Over £500,000 | Over £500,000 |
New leases (lease duty)
Duty on the premium is the same as for transfers of land (except that special rules apply for premium where rent exceeds £600 annually). Duty on the rent is charged on the Net Present Value (NPV). A per cent rate applies to the amount of NPV in excess of the threshold.
| Rate | Net Present Value of rent | |
| Residential | Non-residential | |
| Slice of NPV | ||
| Zero | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £125,000 | Over £150,000 |
The rate of stamp duty/stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2006-07.
Tobacco duty rates
From 6pm on 22 March 2006, tobacco duty rates will be:
| Product | Duty | Effect of tax* on typical item (increase in pence) |
Typical unit |
| Cigarettes | 22 per cent of the retail price plus £105.10 per thousand cigarettes |
9p | packet of 20 |
| Cigars | £153.07 per kilogram | 3p | packet of 5 |
| Hand-rolling tobacco | £110.02 per kilogram | 8p | 25g |
| Other smoking tobacco and chewing tobacco |
£67.30 per kilogram | 5p | 25g of pipe tobacco |
* Tax refers to duty plus VAT
Alcohol duty rates
From midnight on 26 March 2006, duties on alcohol will be:
| Product | Effect of tax* on typical item (increase in pence) |
Typical unit |
| Beer | 1p | pint of beer |
| Wine | 1p | 175 ml glass |
| Wine | 4p | 75cl bottle |
| Sparkling wine | - | 75cl bottle |
| Spirits | - | 70cl bottle |
| Spirits-based RTDs | - | 275ml bottle |
| Cider | - | litre |
| Sparkling cider | - | 75cl bottle |
* Tax refers to duty plus VAT
| Product and basis of duty | Duty |
| Rate per litre of pure alcohol | |
| Spirits | £19.56 |
| Spirits-based RTDs | £19.56 |
| Wine and made-wine: exceeding 22% abv. | £19.56 |
| Rate per hectolitre per cent of alcohol in the beer | |
| Beer | £13.26 |
| Rate per hectolitre of product | |
| Still cider and perry: exceeding 1.2% - not exceeding 7.5% abv. |
£25.61 |
| Still cider and perry: exceeding 7.5% - less than 8.5% abv. |
£38.43 |
| Sparkling cider and perry: exceeding 1.2% - not exceeding 5.5% abv. |
£25.61 |
| Sparkling cider and perry: exceeding 5.5% - less than 8.5% abv. |
£166.70 |
| Wine and made-wine: exceeding 1.2% - not exceeding 4% abv. |
£53.06 |
| Wine and made-wine: exceeding 4% - not exceeding 5.5% abv. |
£72.95 |
| Still wine and made-wine: exceeding 5.5% - not exceeding 15% abv. |
£172.17 |
| Wine and made-wine: exceeding 15% - not exceeding 22% abv. |
£229.55 |
| Sparkling wine and made-wine: exceeding 5.5% - less than 8.5% abv. |
£166.70 |
| Sparkling wine and made-wine: 8.5% and above - not exceeding 15% abv. |
£220.54 |
Fuel duties
All fuel duty rate changes will take effect from 1 September 2006.
| Pence per litre (unless stated) | Old duty rate | Change | New duty rate |
| Sulphur-free petrol/diesel | 47.1p | +1.25p | 48.35p |
| Ultra low sulphur petrol/diesel | 47.1p | +1.25p | 48.35p |
| Biodiesel | 27.1p | +1.25p | 28.35p |
| Bioethanol | 27.1p | +1.25p | 28.35p |
| Road fuel gas other than natural gas (e.g. Liquefied petroleum gas LPG) |
9p per kg | + 3.21p per kg | 12.21per kg |
| Natural gas used as road fuel | 9p per kg | + 1.81p per kg | 10.81per kg |
| Rebated gas oil (red diesel) | 6.44p | +1.25p | 7.69p |
| Rebated fuel oil | 6.04p | +1.25p | 7.29p |
Vehicle excise duty for Private and Light Goods Vehicles
Pre-graduated VED (registered before March 2001)
| £ per year | Change | New rate |
| 1549cc and below | - | £110 |
| above 1549cc | +£5 | £175 |
Graduated VED for Private Vehicles (registered from March 2001)
| £ per year VED band |
CO2 (g/km) | Change | Petrol cars | Diesel cars |
| A | 100 and below | -£65 | £0 | £0 |
| B | 101 to 120 | -£35 | £40 | £50 |
| C | 121 to 150 | -£5 | £100 | £110 |
| D | 151 to 165 | 0 | £125 | £135 |
| E | 166 to 185 | 0 | £150 | £160 |
| F | 186 to 225 | +£25 | £190 | £195 |
| G* | 226 and above | +£45 | £210 | £215 |
*for new cars registered after 23 March 2006
Details
Income tax rates and allowances
The Chancellor announced today that the income tax starting rate limit and basic rate limit are to increase in line with indexation to £2,150 and £33,300 respectively. The taxable bands are uprated each year by indexation unless legislation is passed to override this. A statutory instrument – the Income Tax (Indexation) Order 2006 – has been laid today to give effect to the indexation increases.
From 6 April 2006 the new simplified pensions tax regime comes into effect. This means that the pension schemes earnings cap ceases to exist. From April 2006 there will be two controls on an individual's tax-relieved pension savings: the Annual Allowance (starting at £215,000 for 2006-07) and the Lifetime Allowance (starting at £1,500,000 for 2006-07).
National insurance contributions
National insurance contribution (NIC) rates and thresholds for 2006-07 were announced in the 2005 Pre-Budget Report. The starting point for employers’, employees’ and self-employed NICs in 2006-07 will increase in line with inflation to £97 per week. NICs are not paid on earnings or profits below this amount. The upper earnings and profits limits for NICs will increase from April 2006 in line with inflation from £630 to £645 per week (£33,540 per year). For the self-employed, the rate of Class 2 contributions will be frozen at £2.10 per week.
Capital gains tax
The capital gains tax (CGT) annual exempt amount is increased in line with statutory indexation to £8,800 for the tax year 2006-07 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees is increased to £4,400.
Every husband, wife, civil partner and child has his or her own £8,800 annual exempt amount.
The amount chargeable to CGT is added to the individual’s income liable to income tax and treated as the top part of that total. For 2006-2007, CGT up to the starting rate limit will be charged at 10 per cent, between the starting rate and basic rate limits at 20 per cent, and above the basic rate limit at 40 per cent.
Inheritance tax
As announced in Budget 2005, the inheritance tax threshold is increased by more than statutory indexation to £285,000 for the tax year 2006-07. The value of estates above the threshold is taxed at 40 per cent. The estimated number of taxpaying estates in 2006-07 will be about 37,000 - this is around 6 in 100 deaths. The threshold will be £300,000 in 2007-08. To continue to provide a fair and targeted system, with certainty for families, the Government will now increase the threshold by more than expected statutory indexation for the remainder of the Parliament, to £312,000 in 2008-09 and £325,000 in 2009-10.
Corporation tax
The corporation tax main rate remains at 30 per cent. As announced in the 2005 Pre-Budget Report, the non-corporate distribution and starting rates will be replaced with a new single banding for small companies set at the existing small companies’ rate. The small companies’ rate will therefore apply to companies with taxable profits between £0 and £300,000, and will be 19 per cent in 2006-07. The corporation tax main rate for 2007-08 will also be 30 per cent.
Marginal relief eases the transition from the small companies’ rate to the main rate for companies with profits between £300,000 and £1,500,000. The fraction used in the calculation of this marginal relief will be 11/400.
The profits limit may be reduced for a company that is part of a group or has associated companies. The small companies’ rate and marginal relief do not apply to close investment holding properties.
Child and Working Tax Credits rates and Child Benefit
As announced in the Pre-Budget Report, from 6 April 2006, the child element of the Child Tax Credit will be increased in line with average earnings. In addition, the disabled child elements of Child Tax Credit will be uprated in line with inflation. The elements of Working Tax Credit will also rise in line with inflation.
The child element of Child Tax Credit will increase at least in line with average earnings up to and including 2009-10.
The disregard in tax credits for increases in income between one tax year and the next rises from £2,500 to £25,000 from April 2006.
The rates of Child Benefit and the Guardian’s Allowance will rise in line with inflation, except for the lone parent rate, which remains frozen, from 11 April 2006.
Childcare
The maximum eligible childcare costs remain at £175 per week for families with one child and £300 per week for those with two or more children. The percentage of eligible childcare costs covered increases from 70 per cent in 2005-06, to 80 per cent in 2006-07.
Stamp taxes and duty
The Chancellor announced today that the starting threshold for residential stamp duty is increased to £125,000 from 23 March 2006. Other rates and thresholds remain unchanged, including the £150,000 residential threshold in the 2,000 Enterprise Areas.
Tobacco duties
From 6pm on 22 March 2006, tobacco duty rates will rise in line with inflation, to maintain the real price of tobacco.
Alcohol duty
From midnight on 26 March 2006, duties on beer and wine will increase in line with inflation. Duties on spirits, cider and sparkling wine will not change.
Fuel duty
It is the Government’s policy that fuel duty rates should rise each year at least in line with inflation as the UK seeks to meet its targets of reducing polluting emissions and funding public services.
In Budget 2005, the Government announced an inflation-based increase in fuel duty rates to take effect from 1 September. In July 2005, the Government announced that, because of the continuing volatility in the oil market, the increase would not go ahead. At the 2005 Pre-Budget Report, with continuing market volatility, the Government announced a continuation of the freeze on main fuel duty rates. Budget 2006 announces an inflation based increase in main fuel duties for 2006-07 but because of continuing oil market volatility the changes in rates will be deferred until 1 September 2006.
The duty differentials for biofuels will continue until 2008-09, consistent with the Government’s alternative fuels framework.
Vehicle excise duty (VED)
To further strengthen environmental incentives, the Government announces the introduction of a new higher band of Graduated VED (band G) for the most polluting new vehicles (those above 225g of CO2 per kilometre) registered after 22 March 2006, set at £210 for petrol cars, and the reduction of the VED rates for small number if cars with the very lowest carbon emission (band A) to £0 to assist the development of the low carbon car market.
VED rates will also be reduced for bands B and C by £35 and £5; frozen for bands D and E; and increased by £25 for band F. Rates for pre-2001 registered cars and light goods vehicles in the lower band will be frozen with the higher band increased by £5.
Fifty per cent of vehicles will see their VED frozen or reduced.
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