• At-a-glance
• Administration of Tax
• Personal Taxation
• Employment Taxation
• Business Tax
• Corporation Tax
• Capital Gains
• Savings and Investments
  
• Inheritance Tax
  
• Charities
  
• Trusts
• Anti-avoidance
• Value Added Tax
• Stamp Taxes
• Insurance Premium Tax
• Environmental Taxes
• Excise Duties
• Landline Duty

PERSONAL TAXATION

Income Tax Rates, Rate Limits and Personal Allowances

The basic rate of income tax of 20% and the basic rate limit of £37,400 remain unchanged for 2010/11. The higher rate of income tax of 40% which applies to income in excess of £37,400 is also unchanged but an additional rate of income tax of 50% applies to taxable income over £150,000. The 10% starting rate limit for savings remains at £2,440.

Personal allowances remain unchanged except for taxpayers with adjusted net incomes in excess of £100,000, who for 2010/11 suffer a reduction of their personal allowance by £1 for every £2 of income over £100,000.

Special Guardianship Orders and Residence Orders

A new income tax exemption for special guardians and certain kinship carers is to be introduced from 6 April 2010 for payments received on or after that date. The exemption will apply to ‘qualifying payments’ made to ‘qualifying carers’. ‘Qualifying carers’ are individuals who care for one or more children placed with them under a special guardianship order or under a residence order (where the individual is not the child’s parent or step-parent). ‘Qualifying payments’ are payments made to the carer by the child’s parents or by (or on behalf of) a local authority, in relation to a special guardianship order or a residence order.

Kinship carers who are providing care to a child who has not been placed with them under a residence order will not be qualifying carers for the purposes of the above exemption. However, they will be entitled to claim the new income tax relief for shared lives carers that was announced in the Pre-Budget Report 2009 and which operates in a similar manner to the existing relief for foster carers. Broadly they can choose to pay tax only on their income (if any) from caring that falls above certain fixed limits or on their actual profits computed under the normal income tax rules for businesses.

Remittance Basis

Subject to detailed rules and conditions that were fundamentally revised in 2008, individuals who are resident but either not domiciled or not ordinarily resident in the UK may pay income tax and capital gains tax on the remittance basis. They will then be subject to UK tax on their foreign income and gains only when they are remitted to the UK, rather than on their total worldwide income and gains.

A minor amendment is proposed as below to the current rules. This will have effect for 2010/11 onwards.
The concept of relevant person was introduced in 2008 to ensure that an individual’s foreign income or gains which are remitted to the UK by way of a person closely connected to the individual (or for the benefit or enjoyment of such a person) are taxed on the individual. Such persons are known as ‘relevant persons’. They include, for example, the individual’s spouse (or civil partner) and their minor children and grandchildren. (A cohabiting couple are treated as husband and wife or, as the case may be, civil partners.)

‘Relevant persons’ also include any close companies (broadly companies under the control of five or fewer participators) and their subsidiaries in which such persons are participators. It is not currently explicit that references to a close company are intended to include subsidiaries of non-UK resident companies which would be close companies if they were resident in the UK. To remove any uncertainty, and to remove the potential for abuse, the legislation will be amended to make clear that a relevant person includes such companies.