Legalize / United Kingdom / Public General Act

Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

Part 1 — Overview

Meaning of “adjusted net income”

1

(1) The following Acts make provision about income tax—

(a) ITEPA 2003 (which is about charges to tax on employment income, pension income and social security income and makes provision for the high income child benefit charge),

(b) ITTOIA 2005 (which is about charges to tax on trading income, property income, savings and investment income and some other miscellaneous income), and

(2) There are also provisions about income tax elsewhere: see in particular—

(a) Part 2 of TIOPA 2010 (double taxation relief),

(b) CAA 2001 (allowances for capital expenditure), and

(3) Schedule 1 to the Interpretation Act 1978 (c. 30) defines “the Income Tax Acts” (as all enactments relating to income tax).

The purpose of the issue requirement

2

(1) This Act has 17 Parts.

(2) Part 2 contains basic provisions about income tax including—

(a) provision about the annual nature of income tax (Chapter 1),

(b) the rates at which income tax is charged (Chapter 2), and

(3) Part 3 is about taxpayers' personal reliefs including—

(a) personal allowances (Chapter 2),

(b) blind persons' allowances (Chapter 2), and

(4) Part 4 is about loss relief including relief for—

(a) trade losses (Chapters 2 and 3),

(b) losses from property businesses (Chapter 4),

(d) losses on disposal of shares (Chapter 6), and

(e) losses from miscellaneous transactions (Chapter 7).

(5) Part 5 is about relief under the enterprise investment scheme.

(5A) Part 5A is about relief under the seed enterprise investment scheme.

(5B) Part 5B is about relief for social investments.

(6) Part 6 is about—

(a) relief for investment in venture capital trusts, and

(b) other matters relating to venture capital trusts.

(7) Part 7 is about community investment tax relief.

(8) Part 8 is about a variety of reliefs including relief for—

(a) interest payments (Chapter 1),

(b) gifts to charity including gift aid (Chapters 2 and 3),

(d) maintenance payments (Chapter 5).

(9) Part 9 contains special rules about settlements and trustees including—

(a) general provision about settlements and trustees (Chapter 2),

(b) special income tax rates for trusts (Chapters 3, 4 and 5),

(d) rules about trustees' discretionary payments (Chapter 7),

(e) ... and

(f) rules about heritage maintenance settlements (Chapter 10).

(9A) Part 9A is about the treatment of certain transactions in UK land.

(10) Part 10 contains special rules about charitable trusts etc.

(10A) Part 10A is about alternative finance arrangements.

(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(11ZA) Part 11ZA is about manufactured payments.

(11A) Part 11A is about leasing arrangements involving finance leases or loans.

(12) Part 12 is about accrued income profits.

(12A) Part 12A is about sale and lease-back etc.

(13) Part 13 is about tax avoidance in relation to—

(a) transactions in securities (Chapter 1),

(b) transfers of assets abroad (Chapter 2),

(d) sales of occupation income (Chapter 4), ...

(e) trade losses (Chapter 5) ...

(f) transfers of income streams (Chapter 5A).

(g) finance arrangements (Chapter 5B),

(h) loan or credit transactions (Chapter 5C),

(ha) disposals of assets through partnerships (Chapter 5D),

(hb) disguised investment management fees (Chapter 5E),

(hc) income-based carried interest (Chapter 5F),

(i) leases of plant and machinery (Chapter 6), and

(j) tax relief for interest (Chapter 7).

(14) Part 14 deals with some miscellaneous rules about income tax liability, including—

(za) an alternative basis for charge (the remittance basis) for certain income and gains of certain individuals (Chapter A1),

(a) limits on liability to income tax for non-UK residents (Chapter 1),

(aa) exemption for persons not domiciled in United Kingdom (Chapter 1A),

(b) special rules about residence and domicile (Chapters 2 and 2A), ...

(ba) rules about UK representatives of non-UK residents (Chapters 2B and 2C),

(d) imposition of the charge to income tax on the receipts of certain types of company being wound up (Chapter 3A).

(15) Part 15 is about the deduction of income tax at source.

(16) Part 16 contains definitions which apply for the purposes of the Income Tax Acts and other general provisions which apply for the purposes of those Acts.

(17) Part 17—

(a) contains provisions to be used in interpreting this Act,

(b) introduces Schedule 1 (minor and consequential amendments),

(d) introduces Schedule 3 (repeals and revocations, including of spent enactments),

(e) introduces Schedule 4 (index of defined expressions that apply for the purposes of this Act),

(f) confers powers on the Treasury to make orders, and

(g) makes provision about the coming into force of this Act.

Part 2 — Basic provisions

Chapter 1 — Charges to income tax

Overview of charges to income tax

3

(1) Income tax is charged under—

(a) Part 2 of ITEPA 2003 (employment income),

(b) Part 9 of ITEPA 2003 (pension income),

(d) Part 2 of ITTOIA 2005 (trading income),

(e) Part 3 of ITTOIA 2005 (property income),

(f) Part 4 of ITTOIA 2005 (savings and investment income), and

(g) Part 5 of ITTOIA 2005 (miscellaneous income).

(2) Income tax is also charged under other provisions, including—

(a) Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax charges),

(b) section 7 of F(No.2)A 2005 (social security pension lump sums),

(d) Chapter 2 of Part 12 of this Act (accrued income profits), ...

(e) Part 13 of this Act (tax avoidance), and

(f) Chapter 3A of Part 14 of this Act (banks etc in compulsory liquidation).

Income tax an annual tax

4

(1) Income tax is charged for a year only if an Act so provides.

(2) A year for which income tax is charged is called a “tax year”.

(3) A tax year begins on 6 April and ends on the following 5 April.

(4) “The tax year 2007-08” means the tax year beginning on 6 April 2007 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way).

(5) Every assessment to income tax must be made for a tax year.

(6) Subsection (5) is subject to Chapter 15 of Part 15 (by virtue of which an assessment may relate to a return period).

Income tax and companies

5

Section 3 of CTA 2009 disapplies the provisions of the Income Tax Acts relating to the charge to income tax in relation to income of a company (not accruing to it in a fiduciary or representative capacity) if—

(a) the company is UK resident, or

(b) the company is non-UK resident and it is chargeable to corporation tax in respect of the income, or would be so chargeable but for an exemption.

Chapter 2 — Rates at which income tax is charged

The rates

The starting rate, basic rate and higher rate

6

(1) The main rates at which income tax is charged are—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the basic rate, ...

(d) the additional rate.

(2) The ... basic rate , higher rate and additional rate for a tax year are the rates determined as such by Parliament for the tax year.

(2A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) For other rates at which income tax is charged see—

(za) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(zb) section 6B (Welsh basic, higher and additional rates),

(zc) section 6C (default basic, higher and additional rates),

(a) section 7 (starting rate for savings and savings nil rate),

(aa) section 7A (savings basic, higher and additional rates),

(b) section 8 (dividend nil rate, dividend ordinary rate , dividend upper rate and dividend additional rate), and

(4) See also section 80C of the Scotland Act 1998 which makes provision for the purposes of section 11A (income charged at Scottish rates)

The savings rate

7

(1) The starting rate for savings is 0%.

(2) The savings nil rate is 0%

The dividend ordinary rate and dividend upper rate

8

(A1) The dividend nil rate is 0%.

(1) The dividend ordinary rate is 8.75%.

(2) The dividend upper rate is 33.75%.

(3) The dividend additional rate is 39.35%.

The trust rate and dividend trust rate

9

(1) The trust rate is 45%.

(2) The dividend trust rate is 39.35%.

Income charged at particular rates

Income charged at the starting, basic and higher rates: individuals

10

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Income tax on an individual's income up to the basic rate limit is charged at the basic rate ....

(3) Income tax is charged at the higher rate on an individual's income above the basic rate limit and up to the higher rate limit.

(3A) Income tax is charged at the additional rate on an individual's income above the higher rate limit.

(3B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This section is subject to—

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

section 11A (income charged at Scottish rates),

section 11B (income charged at the Welsh basic, higher and additional rates),

section 11C (income charged at the default basic, higher and additional rates: non-UK resident individuals),

section 11D (savings income charged at the savings basic, higher and additional rates: individuals),

section 12 (savings income charged at the starting rate for savings),

section 12A (savings income charged at the savings nil rate),

section 13 (income charged at the dividend ordinary and dividend upper rates: individuals), and

any other provisions of the Income Tax Acts which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(5) The basic rate limit is £37,700.

(5A) The higher rate limit for a tax year is equal to—

(a) twice the amount specified in subsection (1) of section 35 (personal allowance) for the tax year, plus

(b) the amount specified in subsection (2) of that section (amount at which personal allowance starts to be withdrawn).

(5B) Before the start of the tax year the Treasury must make an order specifying the amount which is, as a result of subsection (5A), the higher rate limit for the tax year.

(6) The basic rate limit and higher rate limit are increased in some circumstances: see—

(a) section 414(2) (gift aid relief), and

(b) section 192(4) of FA 2004 (relief for pension contributions).

(7) See section 21 for indexation of the basic rate limit.

Income charged at the basic rate: other persons

11

(1) Income tax is charged at the default basic rate on the income of persons other than individuals.

(2) This section is subject to—

section 14 (income charged at the dividend ordinary rate: other persons),

Chapters 3 to 5 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate), and

any other provisions of the Income Tax Acts which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

Income charged at the savings rate

12

(1) Income tax is charged at the starting rate for savings ... on so much of an individual's income up to the starting rate limit for savings as—

(a) is savings income, and

(b) would otherwise be charged at the basic rate or the default basic rate.

(2) This is subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(3) The starting rate limit for savings is £5,000.

(4) See section 21 for indexation of the starting rate limit for savings.

(5) Section 16 has effect for determining the extent to which a person's income up to the starting rate limit for savings consists of savings income.

Income charged at the dividend ordinary and dividend upper rates: individuals

13

(1) Income tax is charged at the dividend ordinary rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the ... basic rate, ... or the Welsh basic rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) Income tax is charged at the dividend upper rate on an individual's income which—

(a) is dividend income, ...

(b) would otherwise be charged at the higher rate, ... or the Welsh higher rate, and

(2A) Income tax is charged at the dividend additional rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the additional rate, ... or the Welsh additional rate, and

(3) Subsections (1) to (2A) are subject to any provisions of the Income Tax Acts (apart from section 10 or 11A or 11B) which provide for income to be charged at different rates of income tax in some circumstances.

(4) Section 16 has effect for determining the extent to which an individual's dividend income would otherwise be charged at the ... basic , higher or additional rate ... or the Welsh basic, higher or additional rate.

(5) In relation to an individual who is a Scottish taxpayer, references in this section to income that would otherwise be charged at a particular rate are to be read as references to income that would, if the individual were not a Scottish taxpayer, be charged at that rate (and subsection (4) is to be read accordingly).

Income charged at the dividend ordinary rate: other persons

14

(1) Income tax is charged at the dividend ordinary rate on the income of persons other than individuals which—

(a) is dividend income,

(b) would otherwise be charged at the basic rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) This is subject to—

Chapters 3 to 5 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate),

... and

any other provisions of the Income Tax Acts (apart from section 11) which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

Income charged at the trust rate and the dividend trust rate

15

For the circumstances in which income tax is charged at the trust rate and the dividend trust rate, see Chapters 3 to 5 of Part 9.

Savings and dividend income to be treated as highest part of total income

16

(1) This section has effect for determining —

(za) which part of a Scottish taxpayer's income consists of savings income,

(zb) the rate at which income tax would be charged on the non-savings income of a Welsh taxpayer apart from section 11B,

(a) the extent to which a person's income up to the starting rate limit for savings consists of savings income,

(aa) the extent to which a person's income above the starting rate limit for savings consists of savings income, and

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.