TAX RATES & ALLOWANCES

TAX RATES & ALLOWANCES

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;

  • Personal allowances
  • Income taxrates and band
  • National insurance
  • Tax credits
  • VAT
  • Corporation tax
  • Capital gain tax
  • Inheritance tax
  • Stamp duty taxes
  • Rates & threshold for employers

Disclaimer Note: All information displayed in this section is for reference only. Any use of information from here without our advice is entirely at your own choice.

Please get in touch with us for further information.

PERSONAL ALLOWANCES

The Personal Allowance is the amount of income a person can get before they pay tax.

Allowances

2017 to 2018

2016 to 2017

2015 to 2016

2014 to 2015

Personal Allowance

£11,500

£11,000

£10,600

£10,000

Income limit for Personal Allowance

£100,000

£100,000

£100,000

£100,000

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.

Band

Rate

Income after allowances
2017 to 2018

Income after allowances
2016 to 2017

Income after allowances
2015 to 2016

Income after allowances
2014 to 2015

10% (0% from 2015 to 2016)

Up to £5,000

Up to £5,000

Up to £5,000

Up to £2,880

Basic rate in Scotland

20%

Up to £31,500

Up to £32,000

Up to £31,785

Up to £31,865

Band

Rate

Income after allowances
2017 to 2018

Income after allowances
2016 to 2017

Income after allowances
2015 to 2016

Income after allowances
2014 to 2015

Basic rate in rest of UK

20%

Up to £33,500

Up to £32,000

Up to £31,785

Up to £31,865

Higher rate in Scotland

40%

£31,501 to £150,000

£32,001 to £150,000

£31,786 to £150,000

£31,866 to £150,000

Higher rate in rest of UK

40%

£31,501 to £150,000

£32,001 to £150,000

£31,786 to £150,000

£31,866 to £150,000

Additional rate

45%

Over £150,001

Over £150,001

Over £150,001

Over £150,001

DIVIDENDS

The following rates for tax on dividends apply from 6 April 2010 to 5 April 2016.

Band

Dividend tax rates

Basic rate (and non-taxpayers)

10%

Higher rate

32.5%

Additional rate (from 6 April 2013)

37.5%

Additional rate (dividends paid before 6 April 2013)

42.5%

From 6 April 2016 there’s a new dividend rate;

Tax band

Tax rate on dividends over £5,000

Basic rate

7.5%

Higher rate

32.5%

Additional rate

38.1%

NATIONAL INSURANCE

You pay Class 1 National Insurance contributions. The rates for most people for the 2017 to 2018 tax year are:

 

If you’re employed:

Your pay

Class 1 National Insurance rate

£157 to £866 a week

12%

Over £866 a week

2%

If you’re self-employed:

Class

Rate for tax year 2017 to 2018

Class 2

£2.85 a week

Class 4

9% on profits between £8,164 and £45,000
2% on profits over £45,000

TAX CREDIT

Working tax credit

Rates (£ per year)

2017 to 2018

Basic element

£1,960

Couple and lone parent element

£2,010

30-hour element

£810

Disabled worker element

£3,000

Severe disability element

£1,290

Child tax credit

You could get Child Tax Credit for each child you’re responsible for if they’re:

  • under 16
  • under 20 and in approved education or training

Elements

Yearly Amount

For each child

Up to £2,780

For each disabled child

Up to £3,175 (on top of the child element)

For each severely disabled child

Up to £1,290 (on top of the child element and the disabled child element)

VAT RATES

You must register for VAT with HM Revenue and Customs (HMRC) if your business VAT taxable turnover is more than £85,000.

Rate

% of VAT

What the rate applies to

Standard

20%

Most goods and services

Reduced rate

5%

Some goods and services, e.g. children’s car seats and home energy

Zero rate

0%

Zero-rated goods and services, e.g. most food and children’s clothes

CORPORATION TAX RATES

The standard corporation tax rate is 20%

Rate

2017

2016

2015

2014

Small profits rate
(companies with profits under £300,000)

20%

Main rate
(companies with profits over £300,000)

21%

Main rate (all profits except ring fence profits)

19%

20%

20%

Marginal Relief lower limit

£300,000

Marginal Relief upper limit

£1,500,000

Standard fraction

1/400

Special rate for unit trusts and open-ended investment companies

20%

20%

20%

20%

Ring fence companies

 

Rate

2017

2016

2015

2014

Small profits rate
(companies with profits under £300,000)

19%

19%

19%

19%

Main rate
(companies with profits over £300,000)

30%

30%

30%

30%

Ring fence fraction

11/400

11/400

11/400

11/400

CAPTAIN GAIN TAX RATES

The following Capital Gains Tax rates apply:

  • 20% and 28% tax rates for individuals (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first
  • 28% for trustees or for personal representatives of someone who has died
  • 10% for gains qualifying for Entrepreneurs Relief

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:

  • 28% on your gains from residential property
  • 20% on your gains from other chargeable assets

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.

  • Work out how much taxable income you have – this is your income minus your Personal Allowance and any other Income Tax reliefs you’re entitled to.
  • Work out your total taxable gains
  • Deduct your tax-free allowance from your total taxable gains.
  • Add this amount to your taxable income.
  • If this amount is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on residential property) on any amount above this.

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:

  • £11,300
  • £5,650 for Trusts

INHERITANCE TAX RATES

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.

Nil rate band

This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant.

Nil rate band:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

Inheritance Tax rates

  • The rate of Inheritance Tax is 40% on anything above the threshold.

Who pays Inheritance Tax

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.

STAMP DUTY RATES

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:

  • buy a freehold property
  • buy a new or existing leasehold
  • buy a property through a shared ownership scheme
  • are transferring land or property in exchange for payment, eg you take on a mortgage or buy a share in a house

Rates

How much you pay depends on whether the land or property is residential or commercial.

Residential:

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’).

Property or lease premium or transfer value

SDLT rate

Up to £125,000

0

The next £125,000 (the portion from £125,001 to £250,000)

2%

The next £675,000 (the portion from £250,001 to £925,000)

5%

The next £575,000 (the portion from £925,001 to £1.5 million)

10%

The remaining amount (the portion above £1.5 million)

12%

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:

  • commercial property, eg shops or offices
  • agricultural land
  • forests
  • any other land or property which is not used as a residence
  • 6 or more residential properties bought in a single transaction

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.

Property or lease premium or transfer value

SDLT rate

Up to £150,000

0

The remaining amount (the portion above £250,000)

5%

The next £100,000 (the portion from £150,001 to £250,000)

2%

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.

PAYE tax rates, thresholds and codes

2017-18

Employee personal allowance

£221 per week

£958 per month

£11,500 per year

Basic tax rate

20% on annual earnings above the PAYE tax threshold and up to £33,500

Higher tax rate

40% on annual earnings from £33,501 to £150,000

Additional tax rate

45% on annual earnings above £150,000

Emergency tax code

1150 W1, 1150L M1 or 1150L X

Class 1 National Insurance thresholds

You can only make National Insurance (NI) deductions on earnings above the Lower Earnings Limit (LEL).

Class 1 NICs thresholds

2017-18

Lower earnings limit (LEL)

£113 per week

£490 per month

£ 5,876 per year

Primary Threshold (PT)

£157 per week

£680 per month

£8164 per year

Secondary Threshold (ST)

£157 per week

£680 per month

£8164 per year

Upper Secondary Threshold (under 21) (UST

£866 per week

£3,750 per month

£45,000 per year

Apprentice Upper Secondary Threshold (apprenticeunder25AUST)

£866 per week

£3,750 per month

£45,000 per year

Upper earnings limit (UEL)

£866 per week

£3,750 per month

£45,000 per year

Class 1 National Insurance rates

Employee (primary) contribution rates

Deduct primary contributions (employees National Insurance) from your employees pay through PAYE.

NICs category letter

Earnings at or above LEL up to and including PT

Earnings above UAP up to and including UEL

Balance of earnings above UEL

A

0%

12%

2%

B

0%

5.85%

2%

C

NIL

NIL

NIL

H (Apprentice under 25)

0%

12%

2%

J

0%

2%

2%

M (under 21)

0%

12%

2%

Z (under 21 – deferment)

0%

2%

2%

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.

NICs category letter

Earnings at or above LEL up to and including ST

Earnings above ST up to and includingUEL/UST/AUST

Balance of earnings aboveUEL/UST/AUST

A

0%

13.80%

13.80%

B

0%

13.80%

13.80%

C

0%

13.80%

13.80%

H (Apprentice under 25)

0%

0%

13.80%

J

0%

13.80%

13.80%

I (under 21M (under 21)

0%

0%

13.80%

Z (under 21 – deferment)

0%

0%

13.80%

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.

NI class

2017/18 rate

Class 1A

13.8%

BUDGET 2016 SUMMARY:

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.

Property letting

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:

Year

Finance cost allowed in full 

Finance cost restricted to basic rate

Year to 5 April 2017
Year to 5 April 2018
Year to 5 April 2019
Year to 5 April 2020
Year to 5 April 2021

100%

75%

50%

25%

0%

0%

25%

50%

75%

100%