02
16 March 2005
Income tax rates and allowances, national insurance contributions and other tax and duty rates for 2005-06
Rates and allowances for income tax, capital gains tax, inheritance tax, the pension schemes earnings cap, corporation tax, national insurance contributions, Working and Child Tax Credits, Child Benefit, stamp taxes, tobacco duty, alcohol duty, fuel duty and vehicle excise duty are set out below.
Income tax, capital gains tax, and inheritance tax
| £ per year (unless stated) | 2004-05 | Change | 2005-06 |
| Income tax personal and age-related allowances | |||
| Personal allowance (age under 65) | £4,745 | +£150 | £4,895 |
| Personal allowance (age 65-74) | £6,830 | +£260 | £7,090 |
| Personal allowance (age 75 and over) | £6,950 | +£270 | £7,220 |
| Married couple's allowance* (aged less than 75 and born before 6th April 1935) | £5,725 | +£180 | £5,905 |
| Married couple's allowance* (age 75 and over) | £5,795 | +£180 | £5,975 |
| Married couple's allowance* - minimum amount | £2,210 | +£70 | £2,280 |
| Income limit for age-related allowances | £18,900 | +£600 | £19,500 |
| Blind person’s allowance | £1,560 | +£50 | £1,610 |
| Capital gains tax annual exempt amount | |||
| Individuals etc. | £8,200 | +£300 | £8,500 |
| Most trustees | £4,100 | +£150 | £4,250 |
| Inheritance tax threshold | £263,000 | +£12,000 | £275,000 |
| Pension schemes earnings cap | |||
| Pension schemes earnings cap (1989 Cap) | £102,000 | +£3,600 | £105,600 |
| Occupational Pension Schemes final remuneration cap (1987 Cap) | £100,000 | +£5,600 | £105,600 |
| Occupational Pension Schemes tax free lump sum (1987 Cap) | £150,000 | +£8,400 | £158,400 |
* Married couple's allowance is given at the rate of 10 per cent.
Income tax: taxable bands
| £ per year | 2004-05 | 2005-06 |
| Starting rate: 10% | £0 - £2,020 | £0 - £2,090 |
| Basic rate: 22% | £2,020-£31,400 | £2,090 - £32,400 |
| Higher rate: 40% | over £31,400 | over £32,400 |
Corporation tax on profits
| £ per year (unless stated) | 2004-05 | 2005-06 |
| Starting rate: 0% | £0 – £10,000 | £0 – £10,000 |
| Marginal relief | £10,001 – £50,000 | £10,001 – £50,000 |
| Small companies’ rate: 19% | £50,001 – £300,000 | £50,001 – £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% | 19% |
National insurance contributions
| £ per week (unless stated) | 2004-05 | Change | 2005-06 |
| Lower earnings limit, primary class 1 | £79 | +£3 | £82 |
| Upper earnings limit, primary class 1 | £610 | +£20 | £630 |
| Primary threshold | £91 | +£3 | £94 |
| Secondary threshold | £91 | +£3 | £94 |
| 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 | £2.05 | +£0.05 | £2.10 |
| Class 2 small earnings exception | £4,215 per year | +£130 per year | £4,345 per year |
| Special Class 2 rate for share fishermen | £2.70 | +£0.05 | £2.75 |
| Special Class 2 rate for volunteer development workers | £3.95 | +£0.15 | £4.10 |
| Class 3 rate | £7.15 | +£0.20 | £7.35 |
| Class 4 lower profits limit | £4,745 per year | +£150 per year | £4,895 per year |
| Class 4 upper profits limit | £31,720 per year | +£1,040 per year | £32,760 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) | 2004-05 | Change | 2005-06 |
| Working Tax Credit | |||
| Basic element | £1,570 | +£50 | £1,620 |
| Couple and lone parent element | £1,545 | +£50 | £1,595 |
| 30 hour element | £640 | +£20 | £660 |
| Disabled worker element | £2,100 | +£65 | £2,165 |
| Severe disability element | £890 | +£30 | £920 |
| 50+ Return to work payment (16-29 hours) | £1,075 | +£35 | £1,110 |
| 50+ Return to work payment (30+ hours) | £1,610 | +£50 | £1,660 |
| Childcare element of the Working Tax Credit | |||
| Maximum eligible cost for one child | £135 per week | +£40 per week | £175 per week |
| Maximum eligible cost for two or more children | £200 per week | +£100 per week | £300 per week |
| Percentage of eligible costs covered | 70% | - | 70% |
| Child Tax Credit | |||
| Family element | £545 | - | £545 |
| Family element, baby addition | £545 | - | £545 |
| Child element | £1,625 | +£65 | £1,690 |
| Disabled child element | £2,215 | +£70 | £2,285 |
| Severely disabled child element | £890 | +£30 | £920 |
| Income thresholds and withdrawal rates | |||
| First income threshold | £5,060 | +£160 | £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 | £13,480 | +£430 | £13,910 |
| Income disregard | £2,500 | - | £2,500 |
Child Benefit and Guardian’s Allowance rates from 11 April 2005
| £ per week | 2004-05 | Change | 2005-06 |
| Eldest/Only Child | £16.50 | +£0.50 | £17.00 |
| Other Children | £11.05 | +£0.35 | £11.40 |
| Eldest/Only Child (Lone Parent Rate) | £17.55 | - | £17.55 |
| Guardian’s Allowance | £11.85 | +£0.35 | £12.20 |
Stamp taxes and duties
Transfers of land and buildings (consideration paid) from 17 March 2005
| Rate | Residential in disadvantaged areas | Residential outside disadvantaged areas | Non-residential |
| Total value of consideration | |||
| Zero | £0 - £150,000 | £0 - £120,000 | £0 - £150,000 |
| 1% | Over £150,000 - £250,000 | Over £120,000 - £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 - £120,000 | £0 - £150,000 |
| 1% | Over £120,000 | 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 2005-06.
Tobacco duty rates
From 6pm on 16 March 2005, 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 £102.39 per thousand cigarettes | 7p | packet of 20 |
| Cigars | £149.12 per kilogram | 3p | packet of 5 |
| Hand-rolling tobacco | £107.18 per kilogram | 8p | 25g |
| Other smoking tobacco and chewing tobacco | £65.56 per kilogram | 5p | 25g of pipe tobacco |
* Tax refers to duty plus VAT
Alcohol duty rates
From midnight on 20 March 2005, 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 | £12.92 |
| 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. | £51.69 |
| Wine and made-wine: exceeding 4% - not exceeding 5.5% abv. | £71.07 |
| Still wine and made-wine: exceeding 5.5% - not exceeding 15% abv. | £167.72 |
| Wine and made-wine: Exceeding 15% - not exceeding 22% abv. | £223.62 |
| 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 2005.
| Pence per litre (unless stated) | Old duty rate | Change | New duty rate |
| Sulphur-free petrol/diesel | 47.1p | +1.22p | 48.32p |
| Ultra low sulphur petrol/diesel | 47.1p | +1.22p | 48.32p |
| Biodiesel | 27.1p | +1.22p | 28.32p |
| Bioethanol | 27.1p | +1.22p | 28.32p |
| Road fuel gas other than natural gas (e.g. Liquefied petroleum gas LPG) | 9p per kg | +3.7p per kg | 12.7p per kg |
| Natural gas used as road fuel | 9p per kg | + 1.8p per kg | 10.8p per kg |
| Rebated gas oil (red diesel) | 5.22p | +1.22p | 6.44p |
| Rebated fuel oil | 4.82p | +1.22p | 6.04p |
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 | £170 |
Graduated VED for Private Vehicles (registered from March 2001)
| £ per year VED band |
CO2 (g/km) | Change | Alternative fuel cars | Petrol cars | Diesel cars |
| A | 100 and below | - | £55 | £65 | £75 |
| B | 101 to 120 | - | £65 | £75 | £85 |
| C | 121 to 150 | - | £95 | £105 | £115 |
| D | 151 to 165 | - | £115 | £125 | £135 |
| E | 166 to 185 | +£5 | £140 | £150 | £160 |
| F | 186 and above | +£5 | £160 | £165 | £170 |
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 £2,090 and £32,400 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 2005 - has been laid today to give effect to the indexation increases.
As announced in the 2004 Pre-Budget Report, the personal allowance for those aged 65 and over will increase in line with earnings from April to £7,090 for those aged 65-74, and for those aged 75 or over to £7,220. This means that no one 65 or over will pay tax unless their income reaches £136 per week.
Other allowances, including the personal allowance for those under 65, will be increased by indexation as announced in the Pre-Budget Report. 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 contributions
National insurance contribution (NIC) rates and thresholds for 2005-06 were announced in the 2004 Pre-Budget Report. The starting point for employers’, employees’ and self-employed NICs in 2005-06 will increase in line with inflation to £94 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 2005 in line with inflation from £610 to £630 per week (£32,760 per year). For the self-employed, the rate of Class 2 contributions will be increased in line with inflation to £2.10 per week.
Capital gains tax (CGT)
The capital gains tax annual exempt amount is increased in line with statutory indexation to £8,500 for the tax year 2005-06 for individuals, personal representatives of deceased persons, trustees of certain settlements for the disabled.
Gains arising on disposal of a principal private residence will continue to exempt from capital gains tax.
Inheritance tax
The inheritance tax threshold is increased beyond statutory indexation to £275,000 for 2005-06. The value of estates above the threshold is taxed at 40 per cent. The estimated number of taxpaying estates in 2005-06 will be about 37,000. This is around 6 in 100 deaths. The threshold will be £285,000 for 2006-07 and £300,000 for 2007-08.
Corporation tax
As in 2004-05, 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 below £10,000. The corporation tax main rate for 2006-07 will also be 30 per cent.
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.
Child and Working Tax Credits rates and Child Benefit
As announced in the Pre-Budget Report, from 6 April 2005, the child element of Child Tax Credit will be increased by £65 per year to £1,690 per year, in line with average earnings. In addition, the disabled child elements of Child Tax Credit will be up-rated in line with inflation. The elements of Working Tax Credit will also rise in line with inflation. The rates of Child Benefit and Guardian’s Allowance will rise in line with inflation from 11 April 2005.
The child element of Child Tax Credit will increase at least in line with average earnings up to and including 2007-08.
Childcare
The limits on eligible childcare costs in Working Tax Credit will rise to £175 per week for families with one child and £300 per week for those with two or more children from April 2005; the maximum share of eligible costs covered will be 70 per cent in 2005-06, rising to 80 per cent in 2006-07.
Stamp taxes and duty
The rates for Stamp Duty Land Tax remain unchanged. However the threshold for zero per cent transactions is doubled to £120,000 from 17 March 2005. For residential land and property, the rates and revised thresholds are zero per cent for transactions in consideration of £120,000 or less, 1 per cent for consideration over £120,000 to £250,000, 3 per cent for consideration over £250,000 to £500,000 and 4 per cent on consideration over £500,000. For all non-residential land and property, the rates are zero per cent for transactions in consideration of £150,000 or less, 1 per cent for consideration over £150,000 to £250,000, and thereafter the same as for residential land and property.
The zero per cent band for residential property transactions in Designated Disadvantaged Areas remains at £150,000. The previous exemption for non-residential transactions in Designated Disadvantaged Areas ends today, 16 March 2005.
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 £600 annually). 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 £120,000 for residential land and property, and 1 per cent on the excess over £150,000 for non-residential land and property.
Tobacco duty
From 6 pm on 16 March 2005, tobacco duty rates will rise in line with inflation, to maintain the real price of tobacco.
Alcohol duty
From midnight on 20 March 2005, 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 should rise at least in line with inflation as it seeks to meet its targets of reducing polluting emissions and funding public services. Main road fuel duties will increase in line with inflation by 1.22p per litre. Owing to the sustained volatility in the oil market, the changes in rates will be deferred until 1 September 2005. And the planned duty differentials for biofuels and road fuel gases will continue until 2007-08, consistent with the Government’s alternative fuels framework.
Vehicle excise duty
Following the freeze in VED in Budget 2004, and to underline VED’s environmental focus, VED rates will be frozen for the four least polluting carbon dioxide bands and increased by the standard £5 for the two most polluting bands, as well as for cars and light goods vehicles of over 1549cc registered before 1 March 2001. Changes take effect for licences commencing 1 April 2005.