In this section, we have come up with a summary on each type of tax along with their relevant rates and allowances. Our latest tax rates and allowances section includes the following;
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The Personal Allowance is the amount of income a person can get before they pay tax.
The Personal Allowance goes down by £1 for every £2 of income above the £100,000 limit. It can go down to zero.
INCOME TAX RATES AND BANDS
Tax is paid on the amount of taxable income remaining after allowances have been deducted.
The following rates for tax on dividends apply from 6 April 2010 to 5 April 2016.
From 6 April 2016 there’s a new dividend rate;
You pay Class 1 National Insurance contributions. The rates for most people for the 2017 to 2018 tax year are:
You could get Child Tax Credit for each child you’re responsible for if they’re:
You must register for VAT with HM Revenue and Customs (HMRC) if your business VAT taxable turnover is more than £85,000.
The standard corporation tax rate is 20%
The following Capital Gains Tax rates apply:
Executors and personal representatives
If you’re acting as an executor or personal representative for a deceased person’s estate, you may be entitled to the full Annual Exempt Amount during the ‘administration period’ (time it takes to settle the deceased person’s affairs and get a grant of validation). You’re entitled to the Annual Exempt Amount for the tax year in which the death occurred and the following 2 tax years. After that there’s no tax-free allowance against gains during the administration period.
Trustees for disabled people
If you are acting as a trustee for a disabled person you use the higher Annual Exempt Amount above – and not the rate for other trustees.
A disabled person in this context is a person who has mental health problems
or receives the middle or higher rate of Attendance Allowance or Disability Living Allowance. Find out more about Capital Gains Tax and trusts
You pay a different rate of tax on gains from residential property than you do on other assets.
You don’t usually pay tax when you sell your home.
If you pay higher rate Income Tax
If you’re a higher or additional rate taxpayer you’ll pay:
If you pay basic rate Income Tax
If you’re a basic rate taxpayer, the rate you pay depends on the size of your gain, your taxable income and whether your gain is from residential property or other assets.
CAPITAL GAINS TAX ALLOWANCES
You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount).
The tax-free allowance is:
Inheritance Tax thresholds
The Inheritance Tax threshold (or ‘nil rate band’) is the amount up to which an estate will have no Inheritance Tax to pay.
Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than £325,000 when they die. This is called the Inheritance Tax threshold.
This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant.
Nil rate band:
Usually the ‘executor’ of the will or the ‘administrator’ of the estate pays Inheritance Tax using funds from the estate.
An executor is a person named in the will to deal with the estate – there can be more than one. An administrator is the person who deals with the estate if there’s no will.
Trustees are responsible for paying Inheritance Tax on trusts.
If you’ve received an inheritance, you usually don’t pay Inheritance Tax. There are some exceptions. You may still have to pay other taxes.
You may have to pay Inheritance Tax if someone who died gave you a gift while they were alive.
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland.
The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.
SDLT no longer applies in Scotland. Instead you pay Land and Buildings Transaction Tax when you buy a property.
You pay the tax when you:
How much you pay depends on whether the land or property is residential or commercial.
You pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125,000 when you buy residential property, eg a house or flat.
You must still send an SDLT return for transactions under £125,000 unless they’re exempt.
Freehold sales and transfers
You can also use this table to work out the SDLT for the purchase price of a lease (the ‘lease premium’).
Non-residential or mixed-use:
You pay SDLT on increasing portions of the property price (or ‘consideration’) when you pay £150,000 or more for non-residential or mixed-use land or property.
You must still send an SDLT return for most transactions under £150,000.
Non-residential property includes:
A ‘mixed use’ property is one that has both residential and non-residential elements, e.g. a flat connected to a shop, doctor’s surgery or office.
Freehold sales and transfers
You can also use this table to work out the SDLT rate for a lease premium.
RATES & THRESHOLD FOR EMPLOYERS
PAYE tax and Class 1 National Insurance contributions
You normally operate PAYE as part of your payroll so HM Revenue and Customs (HMRC) can collect Income Tax and National Insurance from your employees.
Your payroll software will calculate how much tax and National Insurance (NI) to deduct from your employees pay.
Tax thresholds, rates and codes
The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.
Class 1 National Insurance thresholds
You can only make National Insurance (NI) deductions on earnings above the Lower Earnings Limit (LEL).
Class 1 National Insurance rates
Employee (primary) contribution rates
Deduct primary contributions (employees National Insurance) from your employees pay through PAYE.
Employer (secondary) contribution rates
You pay secondary contributions (employers National Insurance) to HMRC as part of your PAYE bill.
Pay employers PAYE tax and National Insurance.
Class 1A National Insurance: expenses and benefits
You must pay Class 1A National Insurance on work benefits you give to your employees, eg a company mobile phone. You report and pay Class 1A at the end of each tax year.
Dividend taxation – all change from April 2017
Dividend tax allowance will be reduced from £5,000 to £2,000 in April 2018.
Basic rate taxpayers 7.5%; you will pay personal tax on dividends on basic tax band
Higher rate taxpayers 32.5%
Additional rate taxpayers 38.1%
Corporation tax rates (Financial year from 1st April to 31st March)
At Summer Budget 2015, the government announced legislation setting the Corporation Tax main rate (for all profits except ring fence profits) at 19% for the years starting the 1 April 2017, 2018 and 2019 and at 18% for the year starting 1 April 2020.
There were a number of announcements regarding property letting. You can see the wear and tear consultation elsewhere in this issue. Restricting finance cost relief for individual landlords was another significant potential change.
New measure will restrict relief for finance costs on residential properties to the basic rate of income tax.
This measure will restrict relief for finance costs on residential properties to the basic rate of income tax and will be introduced over four years from 6 April 2017.
The measure will not affect companies renting out property. The measure will not affect individuals renting out commercial property or furnished holiday letting.
The measure will affect residential property in the UK and elsewhere. The measure will affect mortgage interest, interest on loans to buy furnishings and fees incurred taking out or repaying mortgages or loans.
Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.
Landlords will be able to obtain relief as follows: