PN 2: Inland Revenue Tax Rates and Allowances, National Insurance Contributions and other Tax and Duty Rates for 2004-05
Rates and allowances for income tax, corporation tax, capital gains tax, inheritance tax, stamp taxes and the pension schemes earnings cap are set out below.
| Income tax allowances | 2003-04 (£) |
2004-05 (£) |
Increase (£) |
| Personal allowance Personal allowance for people aged 65-74 Personal allowance for people aged 75 and over |
4,615 6,610 6,720 |
4,745 6,830 6,950 |
130 220 230 |
| Income limit for age-related allowances | 18,300 |
18,900 |
600 |
| Married couple’s allowance for people aged under 75 and born before 6 April 1935 Married couple’s allowance –aged 75 or more Minimum amount of married couple’s allowance |
5,565 5,635 2,150 |
5,725 5,795 2,210 |
160 160 60 |
| Blind person’s allowance | 1,510 |
1,560 |
50 |
| Capital gains tax annual exempt amount: Individuals etc: Most trustees: |
7,900 3,950 |
8,200 4,100 |
300 150 |
| Inheritance tax threshold | 255,000 |
263,000 |
8,000 |
| Pension schemes earnings cap | 99,000 |
102,000 |
3,000 |
| Income tax: taxable bands | 2003-04 (£) |
2004-05 (£) |
| Starting rate: 10 per cent | 0 – 1,960 |
0-2,020 |
| Basic rate: 22 per cent | 1,961 – 30,500 |
2,021-31,400 |
| Higher rate: 40 per cent | Over 30,500 |
Over 31,400 |
| Corporation tax profits | 2003-04 (£) |
2004-05 (£) |
| Starting rate: zero | 0 – 10,000 |
0 – 10,000 |
| Marginal relief | 10,001 – 50,000 |
10,001 – 50,000 |
| Small companies’ rate: 19 per cent | 50,001 – 300,000 |
50,001 – 300,000 |
| Marginal relief | 300,001 – 1,500,000 |
300,001 – 1,500,000 |
| Main rate: 30 per cent | 1,500,001 or more |
1,500,001 or more |
The main rate of corporation tax for 2004–05 will be 30 per cent.
National Insurance contributions rates and thresholds
| Item | 2003-04 |
2004-05 |
| Lower earnings limit, primary Class 1 | £77 per week |
£79 per week |
| Upper earnings limit, primary Class 1 | £595 per week |
£610 per week |
| Primary threshold | £89 per week |
£91 per week |
| Secondary threshold | £89 per week |
£91 per week |
| Employees’ primary Class 1 rate | 11% of £89.01 to £ 595 per week 1% above £595 per week |
11% of £91.01 to £610 per week 1% above £610 per week |
| Employees’ contracted-out rebate | 1.6 per cent |
1.6 per cent |
| Married women’s reduced rate | 4.85% of £89.01 to £595 per week 1% above £595 |
4.85% of £91.01 to £ 610 per week 1% above £610 |
| Employers’ secondary Class 1 rate | 12.8% above £89 per
week |
12.8% above £91 per week |
| Employers’ contracted-out rebate, salaryrelated schemes | 3.5 per cent |
3.5 per cent |
| Employers’ contracted-out rebate, money-purchase schemes |
1.0 per cent |
1.0 per cent |
| Class 2 rate | £2.00 per week |
£2.05 per week |
| Class 2 small earnings exception | £4,095 per year |
£4,215 per year |
| Special Class 2 rate for share fishermen | £2.65 per week |
£2.70 per week |
| Special Class 2 rate for volunteer development workers |
£3.85 per week |
£3.95 per week |
| Class 3 rate | £6.95 per week |
£7.15 per week |
| Class 4 lower profits limit | £4,615 per year |
£4,745 per year |
| Class 4 upper profits limit | £30,940 per year |
£31,720 per year |
| Class 4 rate | 8% of £4,615 to £30,940 per year 1% above £30,940 per year |
8% of £4,745 to £ 31,720 per year 1% above £31,720 per year |
Working and Child Tax Credits, Child Benefit and Guardian’s Allowance Rates
| £ per year (unless stated) Working Tax Credit |
2003-04 rates |
2004-05 rates |
Change |
| Basic element | 1,525 |
1,570 |
(+45) |
| Couple and lone parent element | 1,500 |
1,545 |
(+45) |
| 30 hour element | 620 |
640 |
(+20) |
| Disabled worker element | 2,040 |
2,100 |
(+60) |
| Severe disability element | 865 |
890 |
(+25) |
| 50+ return to work payment (16-29 hours) | 1,045 |
1,075 |
(+30) |
| 50+ return to work payment (30+ hours) | 1,565 |
1,610 |
(+45) |
| Childcare element of the Working Tax Credit | |||
| Maximum eligible cost for one child | 135 per week |
135 per week |
(+0) |
| Maximum eligible cost for two children | 200 per week |
200 per week |
(+0) |
| Per cent of eligible childcare costs covered | 70 |
70 |
|
| Child Tax Credit | |||
| Family element | 545 |
545 |
(+0) |
| Family element, baby addition | 545 |
545 |
(+0) |
| Child element | 1,445 |
1,625 |
(+180) |
| Disabled child element | 2,155 |
2,215 |
(+60) |
| Severely disabled child element | 865 |
890 |
(+25) |
| Tax Credits Income thresholds and withdrawal rates | |||
| First income threshold | 5,060 |
5,060 |
(+0) |
| First withdrawal rate (per cent) | 37% |
37% |
|
| Second income threshold | 50,000 |
50,000 |
(+0) |
| Second withdrawal rate (per cent) | 6.67% |
6.67% |
|
| First threshold for those entitled to Child Tax Credit | 13,230 |
13,480 |
(+250) |
| Income disregard | 2,500 |
2,500 |
(+0) |
| Child Benefit/Guardian’s Allowance rates 2004-05 | |||
| £ per week | 2003-04 |
2004-05 |
Change |
| Eldest/only child | 16.05 |
16.50 |
(+0.45) |
| Other children | 10.75 |
11.05 |
(+0.30) |
| Eldest/only child (Lone parent rate) | 17.55 |
17.55 |
(+0) |
| Guardian’s Allowance | 11.55 |
11.85 |
(+0.30) |
Stamp Taxes
Transfers of land and buildings (consideration paid)
| Rate | Land in disadvantaged areas |
All other land in the UK |
||
Residential |
Non-residential |
Residential |
Non-residential |
|
Value of total consideration |
||||
| Zero | £0 - £150,000 |
All |
£0 - £60,000 |
£0 - £150,000 |
| 1% | Over £150,000 - £250,000 |
N/A |
Over £60,000 - £250,000 |
Over £150,000 - £250,000 |
| 3% | Over £250,000 - £500,000 |
N/A |
Over £250,000 - £500,000 |
Over £250,000 - £500,000 |
| 4% | Over £500,000 |
N/A |
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). The rates indicated apply to the amount of NPV in the slice, not to the whole value.
Rate |
Net Present Value of rent
Rate |
|
Residential |
Non-residential |
|
Slice of NPV |
||
Zero |
£0 - £60,000 |
£0 - £150,000 |
1% |
Over £60,000 |
Over £150,000 |
The rate of stamp duty / stamp duty reserve tax on the
transfer of shares and securities is
unchanged at 0.5% for 2004-05.
Tobacco duty rates
From 6pm on 17 March 2004, tobacco duty rates will rise in line with inflation, to maintain the real price of tobacco.
| Product | Effect of tax* on typical item (increase in pence) | Unit |
| Cigarettes | 9.2 |
packet of 20 |
| Cigars | 3.3 |
packet of 5 |
| Hand-rolling tobacco | 9.0 |
25g |
| Pipe tobacco | 5.5 |
25g |
Alcohol duty rates
From midnight on Sunday 21 March, duties on beer and wine will increase in line with inflation.
Product |
Effect of tax* on typical item
(increase in pence) |
Unit |
| Beer | 1 |
pint of beer |
| Wine | 1 |
glass |
| Wine | 4 |
75cl bottle |
| Sparkling wine | No change |
75cl bottle |
| Spirits | No change |
70cl bottle |
| Spirits-based RTDs | No change |
275ml bottle |
| Cider | No change |
litre |
| Sparkling cider | No change |
75cl bottle |
Notes for Editors
Income tax rates and allowances
The Chancellor announced today that the starting rate limit and basic rate limit are to increase in line with indexation to £2,020 and £31,400 respectively.
As announced at the Pre-Budget Report, the personal allowance for those aged 65 and over will increase in line with earnings from April to £6,830 for those aged 65-74, and for those aged 75 or over to £6,950. This means that no one 65 or over will pay tax unless their income reaches £131 per week. Other allowances, including the personal allowance for those under 65, 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 2004-05 were announced in the 2003 Pre-Budget Report. The starting point for employers’, employees’ and self-employed National Insurance Contributions (NICs) in 2004-05 will increase in line with inflation to £ 91 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 2004 in line with inflation from £ 595 to £610 a week (£31,720 a year). For the self-employed the rate of Class 2 contributions will be increased in line with inflation to £2.05 a week.
Child and Working Tax Credits rates and Child Benefit
As announced in the Pre-Budget report, from 6 April 2004, the child element of the Child Tax Credit will be increased by £180 per year to £1,625 per year. 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 12 April 2004.
Capital gains tax (CGT)
The annual exempt amount is set at £8,200 for the tax year 2004-05 for individuals, personal representatives of deceased persons, trustees of certain settlements for the disabled, and £4,100 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
As announced in the Pre-Budget Report, from 6 April 2004 the rate applicable to trusts will be 40 per cent and the Schedule F trust rate on dividends (and similar income) will be 32.5 per cent. Further details about the package of trust measures within the Budget can be found in Press Notice 6: Protecting Revenues.
Inheritance tax
The value of estates above the threshold is taxed at 40 per cent. The estimated number of taxpaying estates in 2004-05 will be about 33,000. This is around 5 in 100 deaths. The inheritance tax threshold is indexed in line with RPI to £263,000 for 2004-05.
The Government has also announced changes that will greatly simplify the inheritance tax system for around 30,000 estates each year. Simplification of the rules will mean that these estates will no longer have to complete a full IHT return.
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 2004-05 the cap is increased to £102,000.
Corporation tax
The corporation tax starting 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.
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
The rates and thresholds for Stamp Duty Land Tax remain unchanged. For residential land and property, the rates are 0% for transactions in consideration of £60,000 or less, 1% for consideration over £60,000 to £250,000, 3% for consideration over £250,000 to £ 500,000 and 4% on consideration over £500,000. For non-residential land and property, the rates are 0% for transactions in consideration of £150,000 or less, 1% for consideration over £150,000 to £250,000, and thereafter the same as for residential land and property. The 0% band for residential transfers in Designated Disadvantaged Areas extends to £150,000. All non-residential transactions in Designated Disadvantaged Areas are exempt.
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% on the excess over £60,000 for residential land and property and 1% on the excess over £150,000 for non-residential land and property.
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