PN08 - Inland Revenue Rates and Allowances for 2003-04

 

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
Personal allowance for people aged 65-74
6,100
6,610
510
Personal allowance for people aged 75 and over
6,370
6,720
350
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
100
Married couple’s allowance – aged 75 or more
5,535
5,635
100
Minimum amount of married couple’s allowance
2,110
2,150
40
Blind person’s allowance
1,480
1,510
30
 
Capital gains tax annual exempt amount:
Individuals etc:
7,700
7,900
200
Other trustees:
3,850
3,950
100
       
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.

National insurance contributions

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
  1% above £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
  1% above £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
  1% above £30,940 per year

Stamp taxes from Budget day to 30 November 2003

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  

New leases (lease duty)

Duty on rent  
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
* applies only where the rent exceeds £5,000 per annum  

Duty on premium is the same as for transfers of property (except special rules apply for premium where rent exceeds £600 annually)

Stamp taxes from 1 December 2003 (implementation of stamp duty land tax)

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.

New leases

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
* Subject to consultation

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.

Notes for Editors

Income tax rates and allowances

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 contributions

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.

Capital gains tax (CGT)

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.

Rates for trusts

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.

Inheritance tax

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.

Pension schemes earnings cap

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.

Corporation tax

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.

Stamp taxes

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 7438 6420/6425
(office hours only)  

HM Customs and Excise Press Office

Press enquiries: 020 7865 4775 / 5472
(out of hours: 020 7620 1313)
   
Non-media enquiries: 0845 010 9000 (National Advice Service)

Government Department Internet Sites

Further information and all published documents relating to the Budget may be found on the Internet at the following addresses:

   
Home
  Top