PN 2
12 March 2008
Income tax allowances, national insurance contributions, child and working tax credit rates 2008-09 and other rates
2008-09 rates and allowances for Income Tax, National Insurance Contributions, the Working and Child Tax Credits, Child Benefit/Guardian’s Allowance, stamp duty land tax, tobacco and alcohol duties, fuel duties, and vehicle excise duties are set out below.
Income tax, capital gains tax, and inheritance tax
£ per year (unless stated) |
2007-08 |
Change |
2008-09 |
| Income tax personal and age-related allowances | |||
| Personal allowance (age under 65) | £5,225 | +£210 | £5,435 |
| Personal allowance (age 65-74) | £7,550 | +£1,480 | £9,030 |
| Personal allowance (age 75 and over) | £7,690 | +£1,490 | £9,180 |
| Married couple's allowance* (aged less than 75 and born before 6th April 1935) | £6,285 | +£250 | £6,535 |
| Married couple's allowance* (age 75 and over) | £6,365 | +£260 | £6,625 |
| Married couple's allowance* - minimum amount | £2,440 | +£100 | £2,540 |
| Income limit for age-related allowances | £20,900 | +£900 | £21,800 |
| Blind person’s allowance | £1,730 | +£70 | £1,800 |
| Capital gains tax annual exempt amount | |||
| Individuals etc. | £9,200 | +£400 | £9,600 |
| Most trustees | £4,600 | +£200 | £4,800 |
| Individual inheritance tax allowance | £300,000 | +£12,000 | £312,000 |
| Pension schemes allowances | |||
| Annual Allowance | £225,000 | +£10,000 | £235,000 |
| Lifetime Allowance | £1,600,000 | +£50,000 | £1,650,000 |
*Married couple's allowance is given at the rate of 10 per cent.
Income tax: taxable bands
2007-08 |
£ per year |
2008-09 |
£ per year |
| Starting rate: 10% | £0-£2,230 | - | - |
| Basic rate: 22% | £2,231-£34,600 | Basic rate: 20%* | £0-£36,000 |
| Higher rate: 40% | Over £34,600 | Higher rate: 40%* | Over £36,000 |
*There will be a new 10% starting rate for savings income only, with a limit of £2320. If an individual’s taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate.
Corporation tax on profits
£ per year (unless stated) |
2007-08 |
2008-09 |
| £0-£300,000 | 20% | 21% |
| £300,001 - £1,500,000 | Marginal relief | Marginal relief |
| £1,500,001 or more | 30% | 28% |
National insurance contributions
£ per week (unless stated) |
2007-08 |
Change |
2008-09 |
| Lower earnings limit, primary Class 1 | £87 | +£3 | £90 |
| Upper earnings limit, primary Class 1 | £670 | +£100 | £770 |
| Primary threshold | £100 | +£5 | £105 |
| Secondary threshold | £100 | +£5 | £105 |
| 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 - salary-related schemes | 1.6% | - | 1.6% |
| Employees’ contracted-out rebate - money-purchase schemes | 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 | 3.7% | - | 3.7% |
| Employers’ contracted-out rebate, money-purchase schemes | 1.4% | - | 1.4% |
| Class 2 rate | £2.20 | +£0.10 | £2.30 |
| Class 2 small earnings exception (per year) | £4,635 | +£190 | £4,825 |
| · Special Class 2 rate for share fishermen | £2.85 | +0.10 | £2.95 |
| Special Class 2 rate for volunteer development workers | £4.35 | +£0.15 | £4.50 |
| Class 3 rate (per week) | £7.80 | £0.30 | £8.10 |
| Class 4 lower profits limit (per year) | +£5,225 | +£210 | £5,435 |
| Class 4 upper profits limit (per year) | £34,840 | +£5,200 | £40,040 |
| 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) |
2007-08 |
Change |
2008-09 |
| Working Tax Credit | |||
| Basic element | £1,730 | +£70 | £1,800 |
| Couple and lone parent element | £1,700 | +£70 | £1,770 |
| 30 hour element | £705 | +£30 | £735 |
| Disabled worker element | £2,310 | +£95 | £2,405 |
| Severe disability element | £980 | +£40 | £1,020 |
| 50+ Return to work payment (16-29 hours) | £1,185 | +£50 | £1,235 |
| 50+ Return to work payment (30+ hours) | £1,770 | +£70 | £1,840 |
| 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 | 80% | - | 80% |
| Child Tax Credit | |||
| Family element | £545 | - | £545 |
| Family element, baby addition | £545 | - | £545 |
| Child element | £1,845 | +£240 | £2,085 |
| Disabled child element | £2,440 | +£100 | £2,540 |
| Severely disabled child element | £980 | +£40 | £1,020 |
| Income thresholds and withdrawal rates | |||
| First income threshold | £5,220 | +£1,200 | £6,420 |
| First withdrawal rate | 37% | +2% | 39% |
| Second income threshold | £50,000 | - | £50,000 |
| Second withdrawal rate | 6.67% | - | 6.67% |
| First threshold for those entitled to Child Tax Credit only | £14,495 | +£1,080 | £15,575 |
| Income disregard | £25,000 | - | £25,000 |
Child Benefit and Guardian’s Allowance rates from 6 April 2008.
£ per week |
2007-08 |
Change |
2008-09 |
| Eldest/Only Child | £18.10 | +£0.70 | £18.80 |
| Other Children | £12.10 | +£0.45 | £12.55 |
| Guardian’s Allowance | £12.95 | +£0.50 | £13.45 |
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 non-residential land and property premium where rent exceeds £1,000 annually. The rules no longer apply to residential property from 12 March 2008). Duty on the rent is charged on any part of the net present value (NPV) which exceeds the threshold.
| Rate | Net Present Value of rent | ||
| Residential in disadvantaged areas | Residential outside disadvantaged areas | Non-residential | |
|
Slice of NPV |
|||
| Zero | £0 - £150,000 | £0 - £125,000 | £0 - £150,000 |
| 1% | Over £150,000 | Over £125,000 | Over £150,000 |
Transfers of shares and stocks
The rate of stamp duty/stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5 per cent for 2008-09.
Tobacco duty rates
From 6pm on 12 March 2008, 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 £112.07 per thousand cigarettes | 11p | packet of 20 |
| Cigars | £163.22 per kilogram | 4p | packet of 5 |
| Hand-rolling tobacco | £117.32 per kilogram | 11p | 25g |
| Other smoking tobacco and chewing tobacco | £71.76 per kilogram | 6p | 25g of pipe tobacco |
* Tax refers to duty plus VAT
Alcohol duty rates
From 17 March 2008, duties on alcohol will be:
Product and basis of duty |
Duty |
| Rate per litre of pure alcohol | |
| Spirits | £21.35 |
| Spirits-based ready to drink | £21.35 |
| Wine and made-wine: exceeding 22% abv. | £21.35 |
| Rate per hectolitre per cent of alcohol in the beer | |
| Beer | £14.96 |
| Rate per hectolitre of product | |
| Still cider and perry: exceeding 1.2% - not exceeding 7.5% abv. |
£28.90 |
| Still cider and perry: exceeding 7.5% - less than 8.5% abv. |
£43.37 |
| Sparkling cider and perry: exceeding 1.2% - not exceeding 5.5% abv. |
£28.90 |
| Sparkling cider and perry: exceeding 5.5% - less than 8.5% abv. |
£188.10 |
| Still and sparkling wine and made-wine: exceeding 1.2% - not exceeding 4% abv. |
£59.87 |
| Still and sparkling wine and made-wine: exceeding 4% - not exceeding 5.5% abv. |
£82.32 |
| Still wine and made-wine: exceeding 5.5% - not exceeding 15% abv. |
£194.28 |
| Still and sparkling wine and made-wine: exceeding 15% - not exceeding 22% abv. |
£259.02 |
| Sparkling wine and made-wine: exceeding 5.5% - less than 8.5% abv. |
£188.10 |
| Sparkling wine and made-wine: 8.5% and above - not exceeding 15% abv. |
£248.85 |
Product |
Effect of tax* on typical item (increase in pence) |
Typical unit |
| Beer (4.2% abv) | 4p | pint of beer |
| Wine | 3p | 175 ml glass |
| Wine | 14p | 75cl bottle |
| Sparkling wine | 18p | 75cl bottle |
| Spirits (37.5% abv) | 55p | 70cl bottle |
| Spirits-based ready to drinks | 3p | 275ml bottle |
| Cider | 3p | litre |
| Sparkling cider | 14p | 75cl bottle |
* Tax refers to duty plus VAT
Fuel duties
All fuel duty rate changes will take effect from 1 October 2008.
Pence per litre (unless stated) |
Old duty rate |
Change |
New duty rate |
| Ultra-low sulphur petrol/diesel | 50.35p | +2p | 52.35p |
| Sulphur-free petrol/diesel | 50.35p | + 2p | 52.35p |
| Biodiesel | 30.35p | +2p | 32.35p |
| Bioethanol | 30.35p | + 2p | 32.35p |
| Liquefied petroleum gas used as road fuel | 16.49p per kg | + 4.28p per kg | 20.77p per kg |
| Natural gas used as road fuel | 13.70p per kg | + 2.89p per kg | 13.70p per kg |
| Rebated gas oil (red diesel) | 9.69p | + 0.38p | 10.07p |
| Fuel Oil | 9.29p | + 0.37p | 9.66p |
Vehicle excise duty for Private and Light Goods Vehicles
Pre-graduated VED (registered before March 2001)
£ per year |
Change |
New rate |
| 1549cc and below | +£5 | £120 |
| above 1549cc | +£5 | £185 |
Graduated VED for Private Vehicles (registered from March 2001)
£ per year
|
CO2 (g/km) |
Change |
Alternative Fuel cars |
Petrol and Diesel cars |
| A | 100 and below | - | £0 | £0 |
| B | 101 to 120 | - | £15 | £35 |
| C | 121 to 150 | +£5 | £100 | £120 |
| D | 151 to 165 | +£5 | £125 | £145 |
| E | 166 to 185 | +£5 | £150 | £170 |
| F | 186 to 225 | +£5 | £195 | £210 |
| G* | 226 and above | +£100 | £385 | £400 |
*for new cars registered from 23 March 2006
Vehicle excise duty for Light Goods Vehicles (registered from March 2001)
£ per year |
Change |
New rate |
| Euro IV incentive rate* | +£5 | £120 |
| Standard rate | +£5 | £180 |
*for Euro IV compliant vans registered between 1 March 2003 and 31 December 2006
Vehicle excise duty for motorcycles
£ per year |
Change |
New rate |
| 150cc and below | - | £15 |
| 151-400cc | +£1 | £33 |
| 401-600cc | +£1 | £48 |
| above 600cc | +£2 | £66 |
Vehicle excise duty for motorised tricycles
£ per year |
Change |
New rate |
| 150cc and below | - | £15 |
| above 600cc | +£2 | £66 |
Changes to VED rates will take effect from 13 March 2008.
Details
Further details of changes in 2008-09 are set out below.
Income tax rates and allowances
The personal allowance for the under 65s will increase in line with inflation to £5,435.
As announced at Budget 2007 the age related allowance has been raised by £1,180 above inflation to £9,030 for people aged between 65 and 74 and to £9,180 for those aged 75 and over. This will mean that in 2008-09 no one aged 65 or over need pay tax on an income of up to £173 a week. Over half of pensioners pay no tax on their income.
As announced at Budget 2007 the basic rate of income tax will be reduced from 22p to 20p – the lowest basic rate in over 75 years. The 20p basic rate tax limit will increase in line with prices to £36,000. The 10p starting rate of tax will be removed for non savings income and replaced with a new 10p starting rate for savings income with a rate limit of £2,320.
Full details on these changes are published in HM Revenue & Customs’ Budget Note - Modernising the Personal Tax System (www.hmrc.gov.uk).
National insurance contributions
National insurance contribution (NIC) rates and thresholds for 2008-09 were announced shortly after the 2007 Pre-Budget Report.
The starting point for employers’, employees’ and self-employed NICs in 2008-09 will increase in line with inflation to £105 per week. NICs are not paid on earnings or profits below this amount. The upper earnings and profits limits for Class 1 and
4 NICs respectively will increase from 2008 from £670 to £770 per week. For the self-employed, the rate of Class 2 contributions will increase to £2.30 per week.
Capital gains tax
The capital gains tax (CGT) annual exempt amount is increased in line with statutory indexation to £9,600 for the tax year 2008-09 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 £4,800.
Every husband, wife, civil partner and child has his or her own £9,600 annual exempt amount.
For gains above the annual exempt amount the CGT rate for 2008-09 will be 18 per cent. In addition, a new entrepreneurs' relief will reduce the effective tax rate on some gains to 10 per cent.
Non-payable dividend tax credit
There is currently a one ninth non-payable dividend tax credit available for UK individuals receiving dividends from UK resident companies. Higher rate taxpayers, who are liable to tax at 32.5 per cent, in practice only pay 25 per cent (of the net dividend) because part of the tax liability is covered by the tax credit. Basic rate taxpayers who are liable to tax at 10 per cent, in practice do not pay any tax on dividends from UK companies because the tax liability will be entirely covered by the tax credit.
Budget 2007 announced a simplification of the tax system for UK individuals with foreign shares. From April 2008 the non-payable dividend tax credit will be extended to dividends from non-UK resident companies, provided the investor owns less than a 10 per cent shareholding.
Budget 2008 announces that from April 2009, the non-payable dividend tax credit will be further extended to investors with a 10 per cent or greater shareholding in a non-UK resident company, unless the source country does not levy a tax on corporate profits similar to corporation tax.
Inheritance tax
As announced in Budgets 2006 and 2007, the inheritance tax allowance will be increased by more than statutory indexation in each of the next three years. The allowance for the tax year 2008-09 is £312,000 for individuals or £624,000 for married couples and civil partners; for 2009-10 it will be £325,000 for individuals or £650,000 for married couples and civil partners; and for 2010-11 it will be £350,000 for individuals or £700,000 for married couples and civil partners. The value of estates over and above the allowance is taxed at 40 per cent. The proportion of estates forecast to pay inheritance tax in 2008-09 is 5%.
Corporation tax
As announced in the major package of reforms to the business tax system at Budget 2007, the main rate in Corporation Tax will be reduced from 30% to 28% from this April. This package also announced that in 2008-09 the Small Companies rate will increase from 20 per cent to 21 per cent.
Capital Allowances
From 1 April 2008 for corporation tax and 6 April 2008 for income tax, changes will apply to the rates of capital allowances. Allowances for plant and machinery will reduce to 20%, allowances for long-life assets will increase to 10% and a new classification of features integral to a building will be introduced at a rate of 10%. The amount of relief claimable under industrial and agricultural buildings allowances will be reduced by one quarter, as part of phasing them out in full by 2011. First-year allowances for small and medium-sized enterprises will be replaced by a new Annual Investment Allowance of £50,000 for most businesses regardless of size, giving relief on 100% of the first £50,000 of expenditure.
Loss making companies investing in plant and machinery which qualifies for Enhanced capital allowances for environmentally beneficial and energy saving technologies will be able to surrender losses from qualifying expenditure for a cash payment of 19% of the expenditure, subject to a cap of the higher of £250,000 or a company’s PAYE/National Insurance Contributions liabilities.
From April 2008, the rate of research and development tax credits will rise from 125% to 130% for large companies and from 150% to 175% for SMEs (the SME increase is subject to approval from the European Commission and will be made effective by Treasury Order from a date not earlier than 1 April 2008).
Child and Working Tax Credits rates and Child Benefit
Child Benefit is raised in line with statutory indexation.
The child element of Child Tax Credit (CTC) increases by £175 above average earnings. The disabled child element and severely disabled elements rise with statutory indexation. The family element (normal and baby addition) remains frozen at £545 per year. The income threshold for CTC only rises to £15,575 per year. The income threshold for CTC family element only remains at £50,000 per year.
The maximum eligible childcare costs remains at £175 for one child and £300 for two or more children. The percentage of eligible childcare costs remains at 80 per cent.
The disregard in Tax Credits for increases in income between one tax year and the next remains at £25,000.
Stamp taxes and duty
The rates and thresholds for stamp duty land tax (SDLT) remain unchanged.
For residential land and property, the rates are 0 per cent for transactions of £125,000 or less, 1 per cent for over £125,000 to £250,000, 3 per cent for over £250,000 to £500,000 and 4 per cent for over £500,000. The 0 per cent band for residential transfers in designated disadvantaged areas extends to £150,000. For non-residential land and property, the rates are 0 per cent for transactions of £150,000 or less, 1 per cent for over £150,000 to £250,000, and thereafter the same as for residential land and property.
For new leases, the rates applicable in respect of the premium are the same as for transfers of land and buildings (except that special rules apply where the rent exceeds £1,000 annually for non-residential land and property. The £600 threshold has been abolished for residential land and property with effect from 12 March 2008).
For the rental element of new leases, the charge is based on the net present value (NPV), which is the total of the discounted annual rental payments. The NPV is charged at 1 per cent on the excess over £125,000 for residential land and property and 1 per cent on the excess over £150,000 for non-residential land and property.
Tobacco duties
From 6pm on 12 March 2008, tobacco duty rates will rise in line with inflation.
Alcohol duty
Duty on all alcohol products will be increased by 6 per cent, from 17 March 2008.
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 reduce polluting emissions and fund public services. Budget 2008 therefore confirms that main road fuel duty rates will rise by 1.84 pence per litre on 1 April 2009, and announces that rates will then also increase by 0.5 pence per litre above indexation on 1 April 2010. Budget 2008 also announces that the planned fuel duty increase of 2 pence per litre in April 2008 will now take place on 1 October 2008.
The Government can also confirm that rebated oils duty increases will also be deferred until 1 October 2008, when they will rise in proportion to main road fuel duties. These rates will also rise by the same proportion as main road fuel duties in the subsequent two years. The compressed natural gas differential will be maintained until 2010-11 and the liquefied petroleum gas differential will decrease by 1 pence per litre on each of 1 October 2008, 1 April 2009 and 1 April 2010.
Vehicle excise duty (VED)
The graduated VED rate for band A will remain frozen at £0 and band B will remain frozen at £35. The rates for bands C-F will rise by £5. Band G will be raised to £400.
VED rates for all cars registered before 2001 and all light goods vehicles will rise by £5.
The rates for motorbikes in the lower band (150cc and below) will be frozen, with other bands increasing by £1, except the rate for above 600cc which will increase by £2.
The lower VED rate for motorised tricycles will be frozen, with the higher rate increased by £2.
VED rates for Heavy Goods Vehicles (HGV), Special Types Vehicles, Combined Transport Vehicles and all vehicle categories that are linked to the basic goods rate will be frozen.
Changes to this year’s VED rates will take effect from 13 March 2008.
Notes for editors
Section 41 of the Tax Credits Act requires a report to be laid before Parliament each year reviewing the amounts of certain tax credit elements and thresholds. Section 145 of the Social Security Contributions and Benefits Act 1992 requires an annual review of Child Benefit rates. Section 150 of the Social Security Administration Act 1992 requires the weekly rate of Guardian’s Allowance to be increased in line with prices.
HM Treasury press office
- Press enquiries: 020 7270 5238
- Non-Media enquiries: 020 7270 4558
HM Revenue & Customs press office
- Press enquiries: 020 7147 0798 / 2328 (Business Tax Desk)
- 020 7147 2318 / 2333 / 2319/ 0051 / 0394 (Personal Tax Desk)
- 020 7147 2314 / 0052 (Law Enforcement Desk)
- 07860 359544 (Out of hours)
Government Department internet sites
Further information and all published documents relating to Budget 2008 may be found on the Internet at the following addresses:
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