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Budget
PN 08
09 April 2003
Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax, stamp taxes, national insurance contributions and the pension schemes earnings cap are set out below.
|
2002-03 (£) |
2003-04 (£) |
Increase (£) |
|
|
Income tax allowances |
|||
|
Personal allowance |
4,615 |
4,615 |
0 |
|
Income limit for age-related allowances |
17,900 |
18,300 |
400 |
|
Married couple’s allowance for people born before 6 April 1935 |
5,465 |
5,565 2,150 |
100 |
|
Blind person’s allowance |
1,480 |
1,510 |
30 |
|
Capital gains tax annual exempt amount: |
|
|
|
|
Inheritance tax threshold |
250,000 |
255,000 |
5,000 |
|
Pension schemes earnings cap |
97,200 |
99,000 |
1,800 |
|
Taxable bands 2002-03 (£) |
Taxable bands 2003-04 (£) |
||
|
Starting rate 10 per cent |
0 – 1,920 |
Starting rate 10 per cent |
0-1,960 |
|
Basic rate 22 per cent |
1,921 – 29,900 |
Basic rate 22 per cent |
1,961-30,500 |
|
Higher rate 40 per cent |
Over 29,900 |
Higher rate 40 per cent |
Over 30,500 |
|
Corporation tax profits 2002-03 (£) |
Corporation tax profits 2003-04 (£) |
||
|
Starting rate zero |
0 – 10,000 |
Starting rate zero |
0 – 10,000 |
|
Marginal relief |
10,001 – 50,000 |
Marginal relief |
10,001 – 50,000 |
|
Small companies’ rate 19 per cent |
50,001 – 300,000 |
Small companies’ rate 19 per cent |
50,001 – 300,000 |
|
Marginal relief |
300,001 – 1,500,000 |
Marginal relief |
300,001 –1,500,000 |
|
Main rate 30 per cent |
1,500,001 or more |
Main rate 30 per cent |
1,500,001 or more |
|
The main rate of corporation tax for 2004–05 will be 30 per cent. |
|||
Rates previously announced in Budget 2002 and 2002 Pre-Budget Report
|
Item |
2003-04 |
|
Lower earnings limit, primary Class 1 |
£77 per week |
|
Upper earnings limit, primary Class 1 |
£595 per week |
|
Primary threshold |
£89 per week |
|
Secondary threshold |
£89 per week |
|
Employees’ primary Class 1 rate |
11% of £89.01 to £595 per week |
|
Employees’ contracted-out rebate |
1.6 per cent |
|
Married women’s reduced rate |
4.85% of £89.01 to £595 per week |
|
Employers’ secondary Class 1 rate |
12.8% above £89 per week |
|
Employers’ contracted-out rebate, salary-related schemes |
3.5 per cent |
|
Employers’ contracted-out rebate, money-purchase schemes |
1.0 per cent |
|
Class 2 rate |
£2.00 per week |
|
Class 2 small earnings exception |
£4,095 per year |
|
Special Class 2 rate for share fishermen |
£2.65 per week |
|
Special Class 2 rate for volunteer development workers |
£3.85 per week |
|
Class 3 rate |
£6.95 per week |
|
Class 4 lower profits limit |
£4,615 per year |
|
Class 4 upper profits limit |
£30,940 per year |
|
Class 4 rate |
8% of £4,615 to £30,940 per year |
Transfers of property (consideration paid)
|
Rate (%) |
All property |
Disadvantaged areas |
|
|
Residential |
Non-residential |
||
|
Zero |
£0 - 60,000 |
£0 - 150,000 |
All |
|
1 |
Over £60,000 - 250,000 |
Over £150,000 – 250,000 |
|
|
3 |
Over £250,000 – 500,000 |
Over £250,000 – £500,000 |
|
|
4 |
Over £500,000 |
Over £500,000 |
|
|
Term |
Rate of charge on average annual rent |
|
Not exceeding 7 years |
1 per cent * |
|
More than 7 years but not exceeding 35 years |
2 per cent |
|
More than 35 years but not exceeding 100 years |
12 per cent |
|
More than 100 years |
24 per cent |
Duty on premium is the same as for transfers of property (except special rules apply for premium where rent exceeds £600 annually)
Transfers of property (consideration paid)
|
Rate (%) |
All land in the UK |
Land in disadvantaged areas |
||
|
Residential |
Non-residential |
Residential |
Non-residential |
|
|
Zero |
£60,000 |
£150,000 |
£150,000 |
All |
|
1 |
Over £60,000 – 250,000 |
Over £150,000 – 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 |
|
Property that is not land, shares or interests in partnerships will no longer be subject to stamp duty.
Proposed duty on rent*
|
Rate (%) |
Net present value of rent |
|
|
Residential |
Non-residential |
|
|
Zero |
£0 - £60,000 |
£0 - £150,000 |
|
1% |
Over £60,000 |
Over £150,000 |
Duty on premium is the same as for transfers of land (except special rules apply for premium where rent exceeds £600 annually).
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2003-04.
The Chancellor has today announced that, for 2003-04, the income tax bands will increase by indexation and that there will be no change in income tax rates.
As announced in Budget 2002, for 2003-04, the income tax personal allowance for those aged under 65 will be frozen. The personal allowance for those aged 65-74 will be increased above inflation to £6,610, and for those aged 75 or over it will be increased to £6,720. This means that no one 65 or over will pay tax unless their income reaches £127 per week. Other allowances will be increased by indexation.
The rate of tax applicable to savings income in section 1A, ICTA 1988, other than dividends, is 20 per cent for income falling between the starting rate and basic rate limits. The rates of tax applicable to dividends are 10 per cent for income below the basic rate limit and 32.5 per cent above it.
The rate of relief for the continuing married couple’s allowance and maintenance relief for people born before 6 April 1935 is 10 per cent.
National insurance (NIC) rates and thresholds for 2003-04 were announced in Budget 2002 and the 2002 Pre Budget Report. The primary and secondary thresholds will be frozen, along with the rate of Class 2 contributions. Other national insurance limits have been increased in line with inflation.
Employers will pay 1 per cent more NICs on earnings above the secondary threshold. All employees will pay an additional 1 per cent on their earnings above the primary threshold up to the upper earnings limit. They will also pay NICs at 1 per cent on earnings above the upper earnings limit. This one per cent increase is purely to fund extra resources for the NHS.
The self-employed will pay an additional 1 per cent Class 4 contributions on their profits or gains between the lower profits limit and upper profits limit. They will also pay Class 4 NICs at 1 per cent on all profits or gains above the upper profits limit.
The annual exempt amount is set at £7,900 for the tax year 2003-04 for individuals, personal representatives of deceased persons, trustees of certain settlements for the disabled, and £3,950 for most other trustees. For individuals, the amount chargeable to CGT is added to the income liable to income tax and is treated as the top part of that total. CGT is charged at the following rates: below the starting rate limit at 10 per cent, between the starting rate limit and basic rate limit at 20 per cent, and above the basic rate limit at 40 per cent.
The rate applicable to trusts remains unchanged at 34 per cent for 2003-04 and the Schedule F trust rate remains unchanged at 25 per cent.
The value of estates above the threshold is taxed at 40 per cent. The threshold is being increased by statutory indexation to £255,000 for taxable transfers in 2003 - 04. The estimated number of taxpaying estates in 2003-04 will be about 29,500. This is around 5 in 100 deaths.
The main effect of the cap is to set a ceiling on the contributions that can be paid to, and the benefits that can be paid by, tax approved pension schemes. It generally applies to people who contribute to a personal pension scheme, joined an occupational scheme set up since 14 March 1989, or joined any occupational scheme from 1 June 1989 that was set up before 14 March 1989. From 6 April 2001 the cap applied to people who contribute to stakeholder pension schemes. For 2003-04 the cap is increased to £99,000.
The corporation tax main rate is 30 per cent. The small companies’ rate is 19 per cent for companies with taxable profits between £50,000 and £300,000 and the starting rate is zero for companies with taxable profits of £10,000 or below.
Marginal relief eases the transition from the starting rate to the small companies’ rate for companies with profits between £10,000 and £50,000. The fraction used in the calculation of this marginal relief will be 19/400. Marginal relief also applies to 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 limits may be reduced for a company that is part of a group or has associated companies. The lower rates and marginal reliefs do not apply to close investment holding companies.
From midnight on Budget day stamp duty on non-residential land and buildings is removed altogether in around 2000 disadvantaged areas. People investing in residential land and buildings in disadvantaged areas will continue to benefit from an exemption from stamp duty where the consideration does not exceed £150,000. The Inland Revenue is today publishing a Statement of Practice on the definition of residential property for the purposes of this relief.
Currently, stamp duty on leases (often called “lease duty”) is calculated by reference to the average annual rent. From 1 December 2003 (the implementation of stamp duty land tax), the proposed charge is to be based on the net present value (NPV) of all the rental payments due over the term of the lease.
Further details of changes to stamp duty on land are set out in the separate press release, PN 04.
HM TREASURY PRESS OFFICE
Press enquiries: 020 7270 5238
Non-media enquiries: 020 7270 4558
INLAND REVENUE PRESS OFFICE
Press enquiries: 020 7438 6692 / 6706 / 7327
(out of hours: 07860 359544)
Non-media enquiries: 020 7944 3000
(office hours only)
HM CUSTOMS AND EXCISE PRESS OFFICE
Press enquiries: 020 7865 4751 / 5472
(out of hours: 020 7620 1313)
GOVERNMENT DEPARTMENT INTERNET SITES
Further information and all published documents relating to the Budget may also be found on the following sites:
Inland Revenue http://www.inlandrevenue.gov.uk/
HM Customs and Excise http://www.hmce.gov.uk/
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