Income Tax Rates and Allowances
For 2006/07, the lower, basic and higher rates of income tax remain at 10%, 22% and 40% respectively.

The starting rate band is increased by £60 to £2,150, and the basic rate band by £840 to £31,150 (so that the higher rate applies to taxable income in excess of £33,300).

The special rates applicable to dividends and other savings income are unchanged.

The rate applicable to discretionary and accumulation trusts remains at 40% (32.5% for dividend income). The ‘basic rate’ band for such trusts is increased from £500 to £1,000.

The basic personal allowance is increased by £140 to £5,035. For this and other personal reliefs, see the table on page 1.

Dormant Accounts of Holocaust Victims
Certain compensation payments made in the year 1996/97 or any later year of assessment to holocaust victims and their heirs in relation to dormant accounts will be exempt from tax.

The measure exempts payments made by foreign banks and building societies, particularly under the Restore UK initiative or the Claims Resolution Tribunal arrangements for dormant accounts in Switzerland, and will cover both the interest that should have credited to the account and also revaluation of the original balance to take account of inflation. The exemption covers income tax, CGT on any gain arising from the disposal of a right to receive the payments and any additional IHT or earlier taxes which may have arisen to an estate from the rights to an original bank account immediately prior to the inception of the scheme concerned.

To qualify for the exemption the original account holder must be a ‘victim of National-Socialist persecution’.