Taxbandsand ratesBudget2003

11 April 2003

Simon Briton

For 2003/04 the new tax bands and rates will be as follows:

Income tax

Personal allowance - £4,615
Starting band 10% - £0 - £1,960
Basic rate 22% - £1,962 - £30,500
Higher rate 40% - over £30,501

Savings income, excluding dividends, in the basic rate band remain taxed at 20%. Dividends remain taxed at 10% for basic and standard rate taxpayers, which is covered by the attached tax credit. Higher rate taxpayers pay are subject to 32.5% tax on dividends, the attached tax credit leaving 25% of the dividend received as chargeable.

Corporation tax

Starting rate 0% - £0 - £10,000
Marginal relief (19/400) - £10,001 to £50,000
Small companies rate 19% - £50,001 to £300,000
Marginal relief (11/400) - £300,001 to £1,500,000
Main rate 30% - over £1,500,000

National Insurance

Employees’ Class 1 lower earnings threshold - £77 per week
Employees’ Class 1 upper earnings threshold - £595 per week
Primary threshold / Secondary threshold - £89 per week
Employees’ rate Class 1 – 11% between £89.01 per week and £595 per week; 1% over £595 per week
Employers’ rate Class 1 – 12.8% over £89.01 per week.

Capital Gains Tax

Individual Annual Exemption - £7,900

Capital gains are charged as the top slice of income and are taxed within the normal bands accordingly. The rate of tax for gains chargeable within the basic rate band is 20%.

Companies pay tax on capital gains as part of their profits chargeable to corporation tax. An important exemption exists for companies, subject to certain restrictions, in relation to the sale of shareholdings of more than 10% of other trading companies.

Inheritance Tax

Tax on death is charged at 40% on chargeable estates over £255,000 (up from £250,000). Liabilities in respect of gifts made within 7 years of relief are given a tapering relief. Lifetime gift tax is charged at 20%.

Stamp Duty

Shares and securities are charged separately, and under the new stamp duty regime coming into effect on 1 December 2003 property which is not land, shares or securities, or covered by an exemption will fall out of charge to stamp duty. Intellectual property and goodwill are covered by a stamp duty exemption.

Shares / securities
0.5% of the consideration, rounded up to the nearest £5.

All land and property (other than shares / securities) up to 1 December 2003, and residential land from 1 December 2003:
Up to £60,000 – 0%
£60,0001 to £250,000 – 1%
£250,001 - £500,000 – 3%
Over £500,000 – 4%

Commercial land from 1 December 2003:
Up to £150,000 – 0%
£150,001 to £250,000 – 1%
£250,001 to £500,000 – 3%
Over £500,000 – 4%

Commercial land in disadvantaged areas will be exempted from the Stamp Duty charge altogether, as will residential land up to £150,000.

VAT

Registration threshold (based on the last 12 months’ or next 30 days’ turnover) - £56,000
Standard rate – 17.5%
The simplified flat rate scheme is available for businesses with a VAT exclusive annual turnover up to £150,000.