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Income Tax and Personal Savings
Income Tax Rates
Rates announced for 2002/03 are as follows:
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2002/03 |
2001/02 |
| Starting rate band to |
£1,920 |
£1,880 |
| Tax rate (all income) |
10% |
10% |
| Basic rate band - next |
£27,980 |
£27,520 |
| Non-savings income tax rate |
22% |
22% |
| Savings income tax rate |
20% |
20% |
| UK dividend income tax rate |
10% |
10% |
| Higher rate - income over |
£29,900 |
£29,400 |
| Normal tax rate |
40% |
40% |
| UK dividend income tax rate |
32.5% |
32.5% |
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Personal Allowances
Rates announced for 2002/03 are as follows (ages are as at the end of the tax year):
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2002/03 |
2001/02 |
| Allowances that reduce taxable income |
£ |
£ |
| Personal allowance |
under 65 |
4,615 |
4,535 |
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65 to 74* |
6,100 |
5,990 |
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75 and over* |
6,370 |
6,260 |
| Allowances that reduce tax |
| Married couple's allowance |
| Age of eldest spouse |
68 to 74* |
546.50 |
536.50 |
| |
75 and over* |
553.50 |
543.50 |
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minimum |
211.00 |
207.00 |
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| * Higher allowances for those aged 65 or more are scaled back when income exceeds £17,900 (2001/02, £17,600). |
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| Children's tax credit |
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| Tax reduction |
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529.00 |
520.00 |
| Baby rate |
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1,049.00 |
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Children's tax credit (CTC) is available to couples or single parents who have at least one
child under the age of 16 at the start of the tax year who lives with them for at least part of the
tax year. CTC is reduced by £1 for every £15 by which the claimant’s taxable income exceeds
£29,900.
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Pointer |
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An enduring power of attorney, appointing someone you trust to
manage your affairs if you are unable to do so as a result of injury or
illness, can mean peace of mind for you and security for your family
in a time of crisis.
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Pensions
The Chancellor announced that the earnings cap for occupational, stakeholder and personal
pension schemes is increased from 6 April 2002 from £95,400 to £97,200.
Charitable giving
Under measures announced by the Chancellor, income or corporation tax relief will be available to,
respectively, individuals and companies making gifts of land or buildings to charity.
Subject to the charity agreeing to accept them, the relief will be available for gifts of freehold or
leasehold property with effect from 1 April 2002 for companies and 6 April 2002 for individuals.
Also proposed are measures to encourage taxpayers to make charitable donations when they
prepare their tax returns. Taking effect from 2003 and 2004, these measures include:
- allowing higher rate taxpayers to carry back their portion of Gift Aid relief to the previous year, and
- allowing taxpayers to nominate a charity to receive all or part of a tax repayment that is due to them.
Lloyds underwriters
Measures announced will ensure that, with effect from 17 April 2002, Lloyd's members entering into
quota share contracts receive tax relief once, and only once, for losses incurred from their
underwriting activities, by:
- restricting relief on quota share contract premiums to take account of any relief already given for
declared but unpaid losses, and
- extending relief for losses covered by cash calls to members who subsequently entered into a quota
share contract.
Life insurance
A tax charge can arise on the sale or surrender of a part of the rights under a qualifying life policy.
It has been announced that measures will be included in the Finance Bill 2002 to ensure that this
only applies if the sale or surrender takes place within ten years of the policy being made, or within
three quarters of its term if that is less, or the policy is made paid up within those same time limits.
As this qualification was inadvertently disapplied by a technical defect in Finance Act 2001, these
measures will have effect to all policy years beginning on or after 6 April 2001.
Also announced were provisions to exclude from the calculation of the gain on the assignment for
consideration of all rights under a life policy such an amount as has already been exempted from
tax on the previous transfer of a share in the rights of the policy by way of gift.
This measure is intended to have effect for all whole assignments for consideration made on or after
6 April 2002.
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Pointer |
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Consider making maximum investment in your personal pension or
retirement annuity policies. But do not overlook the possible
advantages of parallel long-term savings strategies. For example,
ISAs create a structure for regular savings and limited tax breaks,
with continuing access to your capital.
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| ISA Limits |
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Maxi ISA |
Mini ISAs |
| Cash |
£3,000 |
£3,000 |
| Life assurance |
£1,000 |
£1,000 |
| Stocks and shares |
£7,000 |
£3,000 |
| Overall limit |
£7,000 |
£7,000 |
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