Income Tax Rates & Allowances

Income Tax is charged on all income that arises in the UK

Individuals

Personal allowances are deducted from income before calculating income tax at rates determined by the amount of an individual’s income. From 2000/01 the married couple’s allowance is available only to couples at least one of whom was born before 6 April 1935. Relief for this allowance is restricted to 10%.

The extra age allowance above the basic single personal and married couple’s allowance is reduced by £1 for every £2 where total income is more than the age allowance threshold.

A children’s tax credit is available to individuals with at least one child under 16. Relief is given at 10% on £5,200 regardless of the number of children, and will be withdrawn gradually where at least one of the persons entitled to claim in respect of a child is a higher rate taxpayer. For a couple living together the reduction is by reference to the income of the partner with the higher total income.

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Married couples

Husbands and wives are independently subject to income tax, with their own allowances and rates. Where spouses hold assets jointly, the income arising is allocated equally between them. There is an exception to this where the actual division of ownership is unequal and the couple have asked for this split to be the basis for taxing the income.

NB: UK residents may also be liable for income tax on income arising overseas.