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Below are the tax tables for 2007/08.
Use the links below to jump to the subject you are interested in:
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Personal
Tax |
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Income tax and capital
gains tax rates
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|
2007/08 |
2006/07 |
2005/06 |
2004/05 |
| Starting rate on first |
|
2,230 |
£2,150 |
£2,090 |
£2,020 |
| Basic rate on next |
|
32,370 |
£31,150 |
£30,310 |
29,380 |
| Higher rate on taxable income over |
|
34,600 |
£33,300 |
£32,400 |
31,400 |
| Rates differ for |
General |
Savings |
Dividend |
| Starting |
10% |
10% |
10% |
| Basic |
22% |
20% |
10% |
| Higher |
40% |
40% |
32.5% |
|
Allocation of rate bands |
Taxable income uses up the rate bands in the
following order:
* 'general income' (employment, business profits,
rent)
* 'savings income' (mainly interest)
* 'dividends' (mainly distributions from companies)
Capital gains (after annual exemption and taper relief,
see Personal Tax and Capital
Gains Tax) are added to the total income as the 'top
slice' and taxed at the rates applicable to savings income
(10%, 20% or 40%).
|
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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.
|
|
Filing of return and
payment |
2006/07
personal tax return: due to be filed by 31 January 2008
* penalty for late return: £100 (or the tax due,
if less)
2006/07 tax payable:
* tax on employment income paid under PAYE each month
* basic rate liability on savings and dividends usually
settled by receiving the income net of tax paid or credited
* balance of tax due under self assessment (SA):
- payments on account due 31 January 2006 and 31 July
2006, based on the 2004/05 SA income tax and Class 4 NIC
- balance, plus any CGT, due 31 January 2007, with the
first payment on account for 2006/07
Missing any payment dates leads to interest; missing the
balancing payment date by 28 days will lead to a 5% surcharge
and a further 5% surcharge if not paid by 31 July. |
|
Main personal allowances |
| |
2007/08 |
2006/07 |
2005/06 |
|
|
| Personal income tax allowance |
5,225 |
£5,035 |
£4,895 |
£4,745 |
£4,615 |
| CGT annual exemption |
9,200 |
£8,800 |
£8,500 |
8,200 |
7,900 |
| Blind person's allowance |
1,730 |
£1,660 |
£1,610 |
1,560 |
1,510 |
Age allowances |
| |
2007/08 |
2006/07 |
2005/06 |
|
|
| Personal allowance (PA) |
|
|
|
|
|
| * Age 65 - 74 in the tax year |
7,550 |
£7,280 |
£7,090 |
£6,830 |
£6,610 |
| * Age 75 and over in the tax year |
7,690 |
£7,420 |
£7,220 |
£6,950 |
£6,720 |
| * Minimum* |
5,225 |
£5,035 |
£4,895 |
£4,745 |
£4,615 |
| Married couple' allowance (MCA)** |
|
|
|
|
|
| * Age 65 - 74 |
|
|
£5,905 |
£5,725 |
£5,565 |
| * Age 75 and over |
6,365 |
£6,135 |
£5,975 |
£5,795 |
£5,635 |
| * Minimum* |
2,440 |
£2,350 |
£2,280 |
£2,210 |
£2,150 |
| Income Limit* |
20,900 |
£20,100 |
£19,500 |
£18,900 |
£18,300 |
* If the taxpayer's total income exceeds the
income limit (extended for gift aid and pension contributions),
one-half of that excess is deducted from the allowances
- first from the PA until the minimum is reached, then
from the MCA until the minimum is reached.
** Amount depends on age of older spouse; allowed at 10%;
nil if born after 5 April 1937; reduced if marriage took
place during the tax year. |
Main personal reliefs |
Rent-a-room exemption for letting out
part of the taxpayer's only or main residence: gross income
of £4,250pa
Gift aid: on a cash gift to charity, the charity
can reclaim 22/78 (28.2%) of the donation from the Inland
Revenue if the donor makes a declaration. The donor increases
the basic rate band by the gross gift (100/78). 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. |
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Business
Tax |
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Businesses in general pay PAYE in respect
of their employees, and VAT on turnover if they are required
to be registered for that tax. Unincorporated businesses
(sole traders and partnerships) pay income tax and NIC
on their profits; companies pay corporation tax on all
their profits including capital gains.
|
|
Capital allowances |
Capital expenditure is not generally allowed
as an expense. Instead, many classes of capital expenditure
receive a capital allowance, which may spread the cost
over several years, and which is not related to the accounting
depreciation.
The major categories of capital allowance are: |
| Plant and machinery |
2007/08 |
2006/07 |
2005/06 |
| * general: writing down allowance on
residue of expenditure |
25% |
25% |
25% |
| * small businesses: first
year allowance* |
50% |
50% |
40% |
| * medium businesses: first year allowance |
40% |
40% |
40% |
| * all businesses: approved energy saving
plant |
100% |
100% |
100% |
| Cars |
|
|
|
| * general: writing down allowance (max
£3,000pa) |
25% |
25% |
25% |
| * low emission cars (rating up to 120g/km) |
100% |
100% |
100% |
| Long life plant: writing down allowance |
6% |
6% |
6% |
| Research and development: capital equipment |
100% |
100% |
100% |
| Buildings (excluding land value) |
|
|
|
| * industrial buildings: straight line
allowance |
4% |
4% |
4% |
| *
agricultural buildings |
4% |
4% |
4% |
| * qualifying hotels |
4% |
4% |
4% |
| * enterprise zone commercial buildings |
100% |
100% |
100% |
| * enterprise zone buildings if 100%
not claimed in first year |
25% |
25% |
25% |
| * converting vacant space over commercial
premises into flats |
100% |
100% |
100% |
| Know-how and patent rights (not corporation
tax) |
25% |
25% |
25% |
|
| |
| *These apply
for companies from 1st April or 6th April for others |
Different rules for corporation
tax |
Certain categories of capital expenditure
by companies are treated differently. New expenditure
on 'intangible assets', including goodwill, knowhow and
patent rights, is in general relieved for tax according
to the accounting treatment (ie depreciation).
There are increased allowances for companies which clean
up contaminated land or carry out R&D work - the expenditure
is uplifted for tax purposes, effectively creating a grant
for doing the work. The uplift is 50% for land remediation
and for small/medium company R&D, and 25% for large
company R&D. |
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Corporation
Tax |
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Rates from 01.04.07
|
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.
|
| Profits (P) |
2007/08 Rate |
Marginal relief |
Marginal rate |
| £0 - £300,000 |
19% |
|
19% |
| £300,001 - £1.5m |
32.75% |
11/400 x (1.5m - P) |
32.75% |
| over £1.5m |
30% |
|
30% |
|
The bands are adjusted for associated companies
and for accounting periods of less than 12 months.
|
|
Payment and filing |
Companies which do not pay at the full rate
(ie profits below £1.5m) settle their CT liability 9 months
and a day after the end of the accounting period.
Large companies generally make payments on account of
CT 6.5 months, 9.5 months, 12.5 months and 15.5 months
after the start of a 12 month accounting period, with
interest running until final settlement of the period's
liability.
All companies file returns 12 months after the end of
the period.
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Taxation of dividends |
Companies are not charged to CT on dividends
received from other UK companies. Individuals and trusts
receive dividends with a 10% 'tax credit'. The dividend
plus the tax credit (100/90 of the amount received) is
treated as taxable income, and the 10% tax credit settles
some or all of the tax liability. But a taxpayer with
no liability cannot obtain a repayment of the tax credit
from the Revenue - it can only be used to settle liabilities.
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Capital
Gains Tax |
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If the asset was owned before April 1998,
the cost is adjusted for the effect of inflation up to
that month before working out the gain. For assets bought
since, the gain is generally the excess of proceeds over
cost.
CGT is taxed, reported and paid in conjunction with income
tax, and the details are given on Personal Tax. |
Taper relief |
For disposals since April 1998, gains are
reduced according to the length of time for which the
asset has been owned. Assets owned before April 1998 only
count the complete years of ownership after 5 April 1998,
plus one year for a 'non-business asset' which was owned
on 17 March 1998.
Business assets (BA) have a more generous rate of taper
relief:
* shares in a non-trading company, where the taxpayer is
an officer or employee and they own 10% or less.
* any shares in unquoted trading companies.
* more than a 5% holding in quoted trading companies, or
the taxpayer is an officer or employee.
* buildings let by a landlord to an unquoted trading company
or unincorporated trade from 5/4/04.
* assets of an unincorporated business owned by a partner
or sole trader.*
the business asset rules were changed on 6th April 2000
and 6th April 2004 and any gain would therefore need to be
apportioned and the relevant rules applied accordingly.
Non-business assets (NBA) include most non-employee quoted
shareholdings and residential investment properties.
The percentages of a gain which is chargeable for disposals
from 2006/07 onwards are:
|
| Number of years owned for taper
purposes |
Business Assets % |
Non-business Assets
% |
| less than 1 |
100 |
100 |
| 1 |
50 |
100 |
| 2 |
25 |
100 |
| 3 |
25 |
95 |
| 4 |
25 |
90 |
| 5 |
25 |
85 |
| 6 |
25 |
80 |
| 7 |
25 |
75 |
| 8 |
25 |
70 |
| 9 |
25 |
65 |
| 10 |
25 |
60 |
|
Taper relief is calculated after applying
all other reliefs (eg losses), apart from annual exemption.
The effect of reducing the gain is sometimes expressed
as a reduction in the rate of tax Ð the effective rate
for a 40% taxpayer on a BA owned for two years is only
10%, because the gain is reduced to 25% of the full amount.
The rate on NBA falls to 38% with 5% taper, 36% with 10%
taper, etc.
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Other major CGT reliefs |
| A number of types of asset are exempt from
CGT, including chattels (tangible movable property)
which are bought and sold for less than £6,000; cars;
and the taxpayer's only or main residence. A taxpayer
with more than one residence can choose which is to be
exempt, but it is not possible to apply the exemption
to an investment property which is rented out. |
Gifts to charity are not charged to
CGT, and gifts of quoted shares and land also enjoy an
income tax relief (see Personal
Tax). |
Deferral of gains is allowed on some
types of reinvestment, such as subscription for new EIS
shares (see Investment Reliefs). |
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National
Insurance |
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For employees' NIC, see Employee Tax.
Self-employed people pay:
* weekly Class 2 contribution of £2.10, unless they claim
exception for small earnings (below £4,465).
* Class 4 NIC at 8% of taxable profits between £5,225
and £34,840. Profits over £34,840 will be charged at 1%.
This is assessed and paid with the self-assessment income
tax on profits.
Class 3 voluntary NIC may be paid at £7.80 per week by
someone who is not in work but who wishes to maintain
state pension rights.
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Annual limits |
| Someone who is both employed and self-employed
will pay Class 1, Class 2 and Class 4 NIC. It is possible
to apply for deferment of Class 4, and sometimes Class
2 as well, so that the Class 1 paid on earnings can be
taken into account. Class 4 will then be charged at only
1%, and the overall liability will be settled at a later
date. |
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VAT |
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Rates of tax |
The standard rate of VAT remains 17.5%, or
7/47 of the consideration received for making a supply.
A lower rate of 5% (or 1/21 of the gross receipt) applies
to supplies including domestic fuel and power, installation
of energy saving materials in houses, and some conversions
of residential property.
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.
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Thresholds |
An unregistered business must register if
it has made £64,000 of taxable supplies in the last 12
months, up to any month end, or if it expects to make
£64,000 of taxable supplies in the next 30 days.
A registered business can deregister if it can satisfy
Customs that taxable supplies in the next year will not
exceed £62,000.
Small businesses with taxable turnover of up to £150,000
can opt to use the new '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 7/47 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). |
Scale charge for private
use of fuel paid for by business
New VAT fuel scale charges
(which charge VAT on the private use of road fuel provided
by employees) will be introduced. The charges will be
based on the CO2 emissions ratings of the vehicle rather
than the engine size. There will now be 21 'bands' of
charges with a much greater range between the highest and
lowest charges. The new fuel scale charges take effect
from the start of the first VAT accounting period
commencing on or after 1 May 2007. |
Returns and payments |
| Most VAT returns are prepared for three-month
periods, and they are due (with any payment) by the end
of the next month. |
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Inheritance
Tax |
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Rates |
| The nil rate band for cumulative chargeable
transfers in the last seven years is £300,000 for gifts
from 6 April 2007 onwards. Gifts above that are charged
at the following rates: |
| Chargeable legacies on death |
40% |
| Gifts within 7 years of death |
40%, with reductions if over 3 years
before death |
| Lifetime chargeable gifts |
20% if the donee pays the tax, 25%
if the donor pays |
|
Payment |
Inheritance Tax (IHT) on a deceased's estate
and on gifts within 7 years of death is generally payable
at the end of six months after the month of death, but
it must be paid before probate is granted, and this may
necessitate earlier settlement.
IHT on lifetime gifts is generally payable on the later
of six months after the month of transfer or 30 April
in the next tax year.
|
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Major reliefs |
The following transfers are exempt from IHT:
* the first £3,000 gifted in a tax year (unused limit
may be carried forward for one year)
* small gifts of up to £250 to one person in a year
* normal expenditure out of income
* gifts between husband and wife, unless the donor is
domiciled in the UK and the recipient is not in which
case transfers are only exempt up to £55,000.
* gifts between individuals more than 7 years before the
donor's death (until the donor dies such gifts are left
out of account as 'potentially exempt')
* gifts in consideration of marriage - £5,000 from a parent,
£2,500 from a grandparent or a party to the marriage,
£1,000 from others
Most business and agricultural property enjoys a 100%
relief once it has been owned for two years, although
some types of property are relieved only at 50%, and it
is important to meet all the conditions. |
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Trusts |
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Trusts are liable to income tax on income
and CGT on gains for each tax year. The trustees are responsible
for filing self assessment tax returns by the normal date
(31 January 2008 for 2006/07) and paying the tax on the
normal dates (payments on account of income tax on 31
January and 31 July 2007, and the balance of income tax
and the whole of the CGT on 31 January 2008).
The tax rates applicable to trusts are: |
|
|
|
| Rate on general income (profit, rent) |
22% |
40% |
| Rate on savings income (interest) |
20% |
40% |
| Rate on dividend income |
10% |
32.5% |
| Rate on capital gains |
40% |
40% |
| CGT annual exemption |
£4,600 |
£4,600 |
|
The CGT annual exemption is divided between trusts established
by the same settlor since 1978, to a minimum of £820.
Trusts are also liable to pay inheritance tax in a variety
of circumstances, and trustees should make sure that they
have appropriate professional advice to enable them to
fulfil all their legal and fiscal responsibilities. |
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Employee Tax
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Tax rates and payment
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Employment income is charged to both income
tax (as 'general' income) and to Class 1 National Insurance
Contributions. Tax and NIC are normally paid by the employer
through the PAYE system, but an employee whose tax is
not fully paid should complete a tax return and settle
the liability as described on Personal Tax.
If the tax underpaid is up to £2,000 and the 2006/07 tax
return is submitted by 30 September 2007, the underpayment
can be settled through PAYE for 2008/09 rather than being
collected on 31 January 2008. |
Class 1 NIC rates 2006/07
|
|
| Employers and employees both contribute. Employee
contributions used to be capped at the upper earnings
limit, but a new charge of 1% will now apply to all pay
above the primary threshold. |
|
|
| LEL: lower earnings limit |
£87.00 |
| PT: primary threshold |
100.00 |
| UEL: upper earnings limit |
670.00 |
|
No NIC are payable by employee or employer
on earnings up to the PT.
Earnings between the LEL and the PT must be reported by
the employer, and the employee receives credit towards
the State Pension, but no NIC are payable.
Rates of NIC on earnings above the PT depend on whether
the employee is within the State Second Pension (S2P),
or whether the employer has 'contracted out' using a final
salary (FS) or money purchase (MP) scheme. |
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| PT - UEL |
11.0 % |
9.4% |
12.8% |
9.3% |
11.8% |
| Above UEL |
1.0 % |
1.0% |
12.8% |
12.8% |
12.8% |
|
Contracting-out employers receive a special
rebate on earnings between the LEL and the PT.
A person with more than one employment can defer the payment
of some employee NIC until after the end of the tax year,
when the total amount payable can be checked and limited
so the full 11% rate is only applied to income between
the PT and the UEL. |
Benefits in kind |
|
| Benefits in kind are usually valued at a 'cash
equivalent' and are then charged to income tax on the
employee and Class 1A NIC (at 12.8%) on the employer.
The cash equivalent is generally based on the cost to
the employer of providing the benefit, but the following
are charged according to a statutory formula. |
Cars provided by the employer: a percentage
of the original list price of the car, depending on the
CO2 emissions rating of the car. |
|
2005/06 |
2006/07 |
2007/08 |
| 15% of list price |
to
140g/km |
to
140g/km |
to
140g/km |
| 1% addition |
140,
145 etc. |
140,
145 etc. |
140,
145 etc. |
| max 35% benefit |
over
240g/km |
over
240g/km |
over
240g/km |
|
For diesel cars add 3% (min. is 18%, max.
still 35%). There is no discount for the level of business
mileage or the age of the car, but deduct employee contributions
for private use.
|
Fuel provided by the employer for private
use in a company car is charged without reduction for
contributions unless all private fuel is paid for by the
employee.
To calculate the taxable amount the percentage used to
calculate car benefit is applied to a standard figure
of £14,400.
|
Vans
from 6 April 2007, the scale charge will increase to
£3,000 irrespectable of the age of the van. An additional
fuel charge of £500 will also apply for unrestricted
private use.
|
Loans of money of over £5,000 are charged
on the excess of the official rate (5%) over any interest
actually paid by the employee to the employer.
|
Use of assets is charged at 20% of
the original cost of the assets to the employer, or the
value when first made available to the employee, less
any amount paid by the employee for private use.
|
|
Many benefits in kind are not charged to tax.
A full list cannot be given here, but some of the principal
ones are:
* providing a mobile phone, even with private use (but
paying the bills on the employee's own phone remains chargeable)
* the provision of 'green transport' such as works buses
or the use of a bicycle for commuting. |
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LPG |
|
1400cc or less |
9p |
9p |
6p |
|
1401cc - 2000cc |
11p |
9p |
7p |
|
over 2000cc |
16p |
12p |
10p |
|
|
* mileage allowances of up to 24p per mile
for business use of the employee's motorcycle or 20p per
mile for a pedal cycle
* contributions to approved pension schemes
* payments of up to £5 a night when staying away for 'personal
incidental expenses' (£10 if abroad).
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Generally, employees are charged to income
tax on the value of shares that they are given or issued
by their employer, less any amount paid for the shares.
This applies to 'free shares' and to shares acquired under
option schemes. NIC is also charged if the company is
quoted, as the shares can be easily sold.
If the employer operates one of these 'Revenue-approved'
share schemes, the tax charge may be eliminated, reduced
or deferred. |
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Tax
Credits |
|
|
A new system of Tax Credits was introduced
for 2003/04. It is a major change to the way in which
the tax system provides support to people with children
and workers on low incomes. Tax Credits are paid to those
who claim them, and are not an adjustment in the tax computation.
Working Tax Credit (WTC) is paid to employed and
self-employed people on low incomes. The full entitlement
is given for an income of only £5,220, and it is tapered
away to nothing by the time income reaches about £14,495.
There is an additional element which will cover 80% of
qualifying childcare costs of up to £300pw for two children,
and a couple entitled to this can enjoy substantial credit
even on incomes over £30,000.
Child Tax Credit (CTC) is paid to the main carer for children
up to 16 years old, or up to 18 in full-time education.
Entitlement is built up of elements for each child, and
for "the family". The child elements are tapered away
as income increases. The family element of £545 will be
paid in full to couples with a combined income of up to
about £50,000; after that, it will be tapered away to
nothing by the time the joint income reaches £58,000,
or £66,000 in the year a child is born.
Claims are made provisionally for the coming year based
on a previous year's income (2005/06 for 2006/07 claims),
and may be revised up or down at the end of the year if
income has changed significantly.
The new system is very complicated, and this can only
serve as a brief summary. The Inland Revenue website www.inlandrevenue.gov.uk has a ready-reckoner facility
which will estimate the amount of either tax credit due,
and also has forms and details of how to apply. |
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Stamp
Duty |
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|
Stamp duty, stamp duty reserve tax and stamp
duty land tax are charged on transactions in shares and
land. The rates are:
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| * shares |
|
0.5% |
| * land (SDLT): |
|
|
| - consideration up to threshold |
|
0% |
| - consideration threshold - £250,000 |
|
1% |
| - consideration £250,001 - £500,000 |
|
3% |
| - consideration over £500,000 |
|
4% |
The threshold depends on whether
the property is residential or commercial and whether
it is in a "disadvantaged area": |
| |
Residential |
Commercial |
| General |
£125,000 |
£150,000 |
| Disadvantaged |
£150,000 |
exempt |
Stamp duty is charged on the
total consideration, and is always rounded up to the nearest
£5.
SDLT is charged on the whole consideration and is rounded
down to the nearest £1.
SDLT is charged on the grant of a lease on any premium
(using the above rates) and on the discounted net present
value of the rental stream. This charge is at 1% of the
excess of the NPV over the threshold.
Fixed duties on instruments have been abolished. Gifts,
wills and other 'gratuitous transfers' are generally not
liable to duty at all. Stamp duty and its related taxes
are normally due from the purchaser within 30 days of
the chargeable transaction.
|
Insurance
Premium Tax |
|
|
Insurance premium (IPT) tax is charged on
insurance premiums at 5% (general insurance) or 17.5%
(travel insurance and warranties sold with cars and certain
household goods). It is generally collected by the insurer
as part of the premium.
Some long-term insurance products are exempt from IPT,
such as term life insurance, endowments and pensions. |
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Rawlence & Browne Ltd
Second Floor, Cross Keys House,
Queens Street, Salisbury, Wiltshire, SP1 1EY
and now at
1st Floor, 60 High Street, Fordingbridge, SP6 1AX - by appointment
only
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& Browne 2008 -
All Rights Reserved
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