Introduction Background Note
8.Income tax is an annual tax.  It is for Parliament to impose income tax for a tax year.
9.The rates of income tax for the main rates are determined by Parliament for a tax year.  The main rates of income tax currently provided for are the basic rate, the higher rate and the additional rate.
10.Other rates of income tax are included within the Tax Acts.
11.There are alternative rates of income tax for dividends.  The dividend additional rate applies to dividend income that would otherwise be taxable at the additional rate.
12.The trust rate of tax is the rate of tax paid by trustees that generally applies to the income of discretionary or accumulation trusts.  Trustees are liable to tax on income received at the trust rate of tax, but dividends and other similar income are chargeable at the dividend trust rate.
13.Section 394 of ITEPA prevents individuals, who are liable to the highest rate of income tax, avoiding tax by transferring rights to receive retirement benefits to another person such as a company, which is not liable to the top rate of income tax.
14.Section 640 of ITTOIA sets out the amount of notional tax credit attached to certain capital payments, made by trustees to settlors, that are deemed for tax purposes to be income.  A charge to tax on the settlor arises when the capital payment can be matched with undistributed income in the trust.  A payment is matched first with the earlier income of the trust.  The notional credit is linked to the rate of tax that the trustees have paid on the income with which the capital payment is matched.  As the trust rate will decrease to 45 per cent for 2013-14 onwards, the amendment ensures that the notional tax credit for capital payments matched with undistributed income of 2013-14 onwards is also decreased to 45 per cent.