Commentary on Sections Overview Overview Section 21: Indexation of the starting rate limit and the basic rate limit
72.This section provides for indexation of the starting rate and basic rate limits. It is based on section 1(4) to (6) of ICTA.
73.Subsections (2) and (3) set out in step form how to compute the limit for a given year by reference to the limit for the previous year and the percentage rise in the retail prices index. The words “unless Parliament otherwise determines” in section 1(4) have been omitted as it is always open to a Finance Act to disapply this provision, so no express provision to this effect is needed.
74.Subsection (4) is an administrative provision to reflect the fact that it is usually only known at the time of the Chancellor’s Budget speech whether statutory indexation will apply. This leaves insufficient time before the start of the tax year for employers to update their payroll systems. This rule gives employers until the first pay-day after 17 May to make the necessary changes.
75.Subsection (5) obliges the Treasury to specify the indexed amounts in a statutory instrument which must be made in the tax year before the tax year to which they are to apply.