Although a 10% starting rate of personal income tax was introduced by Gordon Brown in 1999 as the lowest rate of tax, it was also discontinued by him in 2008 to make way for the abolition of tax for earnings up to £10,000 which was planned to be introduced on a gradual scale.

However, there is still a 10% rate of savings tax which can apply in some circumstances.

It is a little bit tricky to work out if you are entitled to use the 10% rate of savings tax but I will try and simplify it as follows:

• If you only have savings income (not earned income) and this exceeds the personal allowance, then you can use the 10% rate of tax up to the maximum of £2,710 (for the tax year 2012/13)
• If all of your earnings are below the personal allowance (see personal allowance rates for 2012/13) then no tax is payable anyway.
• If you have earned income below the personal allowance but investment income that, added on, exceeds it, you can use the 10% allowance.
• If you have earned income that exceeds the personal allowance but does not exceed the personal allowance + the 10% allowance then you can use the remaining 10% allowance for savings income.
• If you have earned income that exceeds the personal allowance + the 10% allowance (i.e. 8,105 + 2,170 for under 65s in 2012/13) then you cannot make use of the 10% allowance for savings and they will be charged at 20% (or the appropriate rate if higher)