Introduction Background Note
5.Income tax is an annual tax re-imposed each year by Parliament (even if the proposed rates are the same as for previous years). Parliament also sets the main rates of income tax annually.
6.Where there is an annual increase in the retail prices index (RPI) to the September preceding the relevant tax year, HM Treasury makes an “indexation order”. The indexation order sets the amounts of the basic rate limit, the starting rate limit for savings and personal allowances for the following tax year in amounts increased by the percentage increase in the RPI (any of these amounts can be over-ridden by Parliament through a provision in the Finance Bill). The RPI for the year to September 2009 decreased, so HM Treasury were not able to make an indexation order to set the amounts of the basic rate limit, the starting rate limit for savings and personal allowances for 2010-11. For 2010-11, this section sets the basic rate limit, the starting rate limit for savings, and the personal allowances in the amounts that they were for 2009-10.
7.The table below sets out the main rates and income bands for 2009-10 as they apply to taxable income and the proposed main rates and income bands for 2010-11:
8.The table below sets out the starting rate limit for savings for 2009-10 and the proposed starting rate limit for savings for 2010-11:
9.The table below sets out the personal allowances for 2009-10 and the proposed personal allowances for 2010-11:
10.The basic rate limit, starting rate limit for savings and the personal allowances are provided for by ITA, as amended by Finance Acts 2008 and 2009.