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Encyclopedia > Income Tax UK
UK Income Tax and National Insurance (2005–2006)
UK Income Tax and National Insurance (2005–2006)
UK Income Tax and National Insurance as a % of Salary (2005–2006)

Income tax forms the bulk of revenues collected by the government. Each person has an income tax allowance, and income up to this amount in each tax year is free of tax for everyone. For 2006-07 the tax allowance for under 65s is £ 5,035.[1] Above this amount there are a number of tax bands - each taxed at a different rate: Image File history File links UK_Tax. ... Image File history File links UK_Tax. ... Image File history File links UK_Tax_(percent). ... Image File history File links UK_Tax_(percent). ... An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. ...

Rate Dividend Income Savings Income Other Income Band (above any personal allowance)
Starting rate 10% 10% 10% 0 - £2,150
Basic rate 10% 20% 22% £2,151 - £33,300
Higher rate 32.5% 40% 40% over £33,300

Figures for 2006-07.[1]


Note that these rates only apply to income within that tax band. Thus in 2006/07 someone with an income of £7185 per year would only pay £215 in tax, as they pay nothing from their tax allowance and ten per-cent from the next £2150 of income.


Savings income (for instance, interest received from investments, and/or capital gains) is taxed at a lower rate of 20% (instead of 22%) within the basic rate band, and at 40% above it (over £33,300 in 2006-07).


Income from share dividends is taxed at 10% up to the basic rate limit (£33,300) and at 32.5% above that. This article or section does not adequately cite its references or sources. ... // This article is about corporate dividends. ...



ISAs: Everyone aged 16 or over can put up to £3,000 a year into a cash ISA. Over-18s have more choice. They can either put £7,000 into a stock market Isa or split the money, putting £3,000 into a cash Isa and £4,000 into a stock market ISA. Cash ISAs pay tax-free interest. Stock market-based ISAs give protection from capital gains tax and higher-rate taxpayers avoid paying an extra 25% tax on dividends paid on share-based investments. Those opting for corporate bond Isas receive taxfree income.



Broadly speaking, the taxpayer is entitled to apply these bands to their income in the order which produces the lowest liability, but with capital gains always being taxed as the top "slice". In practice this means that ordinary income will be taxed first, using the personal allowance and starting rate, interest income second, dividends third, with capital gains being taxed last as the highest "slice" of income.


Capital gains tax

Capital gains are subject to tax at the marginal rate of income tax (for individuals) or of corporation tax (for companies). In finance, a capital gain is profit that is realized from the sale of an asset that was previously purchased at a lower price. ... In the tax system and in economics, the marginal tax rate refers to the increase in ones tax obligation as ones taxable income rises: marginal tax rate = Δ(tax obligation)/Δ(taxable income) This can be measured either by looking at the published tax tables (to get the official marginal...


Capital gains for individuals are taxed slightly differently from those for companies:

  • The basic calculation for individuals (in very broad terms) is proceeds less cost; the gain is then subjected to taper relief (a percentage reduction which varies depending on how long the asset was held prior to its disposal, and whether the asset was a "business" asset or a "non-business" asset in the hands of the owner). Individuals also have a capital gains tax free amount or "annual exemption" (in 2005-06 this was £8,500, and in 2006-07 it is £8,880).[2]
  • For companies, the chargeable gain is calculated (again, in very broad terms) as proceeds less cost; however, instead of taper relief, companies are entitled to indexation allowance, which is calculated with reference to movements in the retail prices index (individuals are also entitled to indexation allowance prior to April 1998). Companies are not entitled to any annual exemption.
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The Income Tax Act 1842 (citation 5 & 6 Vict c. 35) was an Act of the Parliament of the United Kingdom, passed under the government of Robert Peel, which re-introduced an income tax in Britain, at the rate of 7 pence in the pound on all annual incomes greater than £150. It was the first imposition of income tax in Britain outside of wartime. Although promoted as a temporary measure, income tax has been levied continually in Britain ever since. In economics, the Consumer Price Index (CPI, also retail price index) is a statistical measure of a weighted average of prices of a specified set of goods and services purchased by wage earners in urban areas. ... This is a list of Acts of Parliament of the English Parliament during that bodys existence prior to the Act of Union of 1707. ... This is a list of Acts of Parliament of the English Parliament during that bodys existence prior to the Act of Union of 1707. ... This is a list of Acts of Parliament of the English Parliament during that bodys existence prior to the Act of Union of 1707. ... This is a list of Acts of Parliament of the English Parliament during that bodys existence prior to the Act of Union of 1707. ... This is a list of Acts of Parliament of the Scottish Parliament. ... This is an incomplete list of Acts of the Parliament of Ireland for the years up to its dissolution in 1800. ... This is an incomplete list of Acts of the Parliament of Great Britain for the years 1707-1719. ... This is an incomplete list of Acts of the Parliament of Great Britain for the years 1720-1739. ... This is an incomplete list of Acts of the Parliament of Great Britain for the years 1740-1759. ... This is an incomplete list of Acts of the Parliament of Great Britain for the years 1760-1779. ... This is an incomplete list of Acts of the Parliament of Great Britain for the years 1780-1800. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1801-1819. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1820-1839. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1840-1859. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1860-1879. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1880-1899. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1900-1919. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1920-1939. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1940-1959. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1960-1979. ... This is an incomplete list of Acts of the Parliament of the United Kingdom for the years 1980-1999. ... This is an list of Acts of the Parliament of the United Kingdom for the years 2000 to the present. ... This is a list of Acts of the Scottish Parliament. ... This is a list of Acts passed by the Parliament of Northern Ireland. ... This is a list of Acts of the Northern Ireland Assembly passed by that body during its existence between 2000 and 2002 when it was suspended. ... The is a list of Orders in Council for Northern Ireland which are primary legislation for the province when the it is being directly ruled from London and also for those powers not devolved to the Northern Ireland Assembly. ... Statutory Instruments (SIs) are parts of United Kingdom law separate from Acts of Parliament which do not require full Parliamentary approval before becoming law. ... In Westminster System parliaments, an Act of Parliament is a part of the law passed by the Parliament. ... The Houses of Parliament, seen over Westminster Bridge The Parliament of the United Kingdom of Great Britain and Northern Ireland is the supreme legislative body in the United Kingdom and British overseas territories. ... Sir Robert Peel, 2nd Baronet (5 February 1788 – 2 July 1850) was the Conservative Prime Minister of the United Kingdom from December 10, 1834 to April 8, 1835, and again from August 30, 1841 to June 29, 1846. ... An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. ... For silver pennies produced after 1820 see Maundy money. ... ISO 4217 Code GBP User(s) United Kingdom, the British Indian Ocean Territory[1] Inflation 2. ...


In its detail, the Act of 1842 was substantially similar to the Income Tax Act of 1803 introduced by Henry Addington during the Napoleonic Wars. The Right Honourable Henry Addington, 1st Viscount Sidmouth, PC (30 May 1757–15 February 1844) was a British statesman, Prime Minister of the United Kingdom from 1801 to 1804. ... Combatants Allies: Austria[1] Portugal Prussia[1] Russia[2] Spain[3] Sweden United Kingdom[4] Ottoman Empire[5] French Empire Holland Kingdom of Italy Kingdom of Naples Duchy of Warsaw Bavaria[6] Saxony[7] Denmark [8] Commanders Archduke Charles Prince Schwarzenberg Karl Mack von Leiberich Gebhard von Blücher Karl...


See also

The Inland Revenue was, until April 2005, a department of the British Government responsible for the collection of direct taxation, including income tax, national insurance contributions, capital gains tax, inheritance tax, corporation tax, petroleum revenue tax and stamp duty. ... The Chartered Institute of Taxation is the leading body for tax professionals in the United Kingdom. ...

External links

  • The Creators of the Modern Income Tax

 
 

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