The rate of tax depends on the total profits of the company, but marginal relief is available where the profits fall within particular bands. The effective rate of tax within the band is shown in the table.
|£0 to £300,000||20%||20%|
|£300,001 to £1,500,000||21.25%||23.75%|
The bands are adjusted for associated companies and for accounting periods of less than 12 months.
Value Added Tax (VAT)
Rates of tax
The standard rate of VAT is 20%, or 1/6th of the consideration received for making a supply.
A zero rate applies to a range of supplies including most food, books, new houses, and children’s clothes.
Certain other supplies are exempt, which means no tax is charged to the customer, but the supplier cannot recover VAT on costs. These include many land-related supplies, insurance, finance, education, health and welfare, and non-profit sports clubs.
An unregistered business must register if it has made £81,000 of taxable supplies in the last 12 months, up to any month end.
A registered business can deregister if it can satisfy HMRC that taxable supplies in the next year will not exceed £79,000.
Small businesses with taxable turnover of up to £150,000 can opt to use the ‘flat-rate scheme’. A single rate, which varies with the type of business, is applied to all receipts, and no VAT is claimed on costs. The single rate is lower than 1/6th to compensate for lost input tax.
Small businesses with taxable turnover of up to £1,350,000 can use the cash accounting scheme (only paying VAT to Customs when customers have paid).
Personal allowances will be tapered at a rate of £1 for each £2 of income above £100,000. This equates to a 60% rate on those with incomes between £100,000 and £116,210. So effective rates are as follows:-
|up to £10,000||0%||0%|
|£10,000 – £10,500||0%||20%|
|£10,501 – £41,865||20%||20%|
|£41,866 – £42,285||20%||40%|
|£42,285 – £100,000||40%||40%|
|£100,001 – £120,000||60%||60%|
|£120,001 – £150,000||40%||40%|
The small 10% band is retained for savings income. This rate is available for up to £2,880 of savings income in 2014/15. Because the rate of Income Tax you pay on savings is worked out after any non-savings income has been taken into account, if your non-savings income is less than £2,880, or if savings and investments are your only source of income, your savings income will be taxed at the 10 per cent starting rate up to the limit. If, however, you already have non-savings income which takes you above the starting rate, all of your savings will be taxed at the 20 per cent basic rate.From 6th April 2015 this will increase to £5,000 and the tax rate itself will reduce to 0%. Therefore those with modest incomes or with modest incomes and dividends will be able to receive interest free of tax.
From 6th April 2015 an individual will be able to transfer up to 10% of their personal allowance to their spouse or civil partner so long as that person is not a higher rate taxpayer.
In 2014/15 an individual can receive total gross income of £41,865 before paying higher rate tax.
Allocation of rate bands
Taxable income uses up the rate bands in the following order:
|General Income||Employment, business profits, rent|
|Savings Income||Predominantly interest|
|Dividend Income||Distributions from shares|
Extension of basic rate band
A taxpayer who pays personal (including stakeholder) pension policy premiums, or cash gifts to charity, increases the basic rate band by the grossed up equivalent of the payment. This means that more tax is paid at the basic rate and less is paid at the top rate.
Main Personal Allowances
|Personal Income Tax||£10,000||£9,440|
|Capital Gains Tax (CGT) Annual Exemption||£11,000||£10,900|
|Blind Persons Allowance||£2,230||£2,160|
|Personal Income Tax Allowance|
|Age 65-74 in the tax year||£10,500||£10,500|
|Age 75 + in the tax year||£10,660||£10,660|
|Married Couples Allowance – Available where one spouse or civil partner was born before 6th April 1938||£8,165||£7,915|
* Born before 6th April 1938
If the taxpayer’s total income exceeds the income limit (extended for gift aid and pension contributions), the age related allowances are reduced by £1 for every £2 of excess income. This is applied first from the Personal Allowance until the minimum is reached, then from the Married Couples Allowance until the minimum is reached.
Please note that the Married Couple Allowance is applied by way of a tax reduction and relief is granted at 10%.
Main Personal Reliefs
For letting out part of the taxpayer’s only or main residence, you may receive gross income of £4,250 per annum.
On a cash gift to charity, the charity can reclaim 20/80 (25%) of the donation from HMRC if the donor makes a declaration. The donor increases the basic rate band by the gross gift (100/80). The market value of gifts of land or quoted shares can be deducted from taxable income for full tax relief, and the charity pays no tax on the gift received.