Tax Rates and Allowances for Individuals and Business

Tax Rates & Allowance for Individuals 

Personal Allowances 2017/18

Individuals (all): £11,500
Marriage allowance*: £1,150
Minimum married couples allowance*: £3,260
Maximum married couples allowance*: £8,445
Income limit for married couple’s allowances: £28,000 (allowances are abated if income limit exceeded)
Blind person’s allowance: £2,320
Dividend allowance: £5,000
Personal savings allowance (basic rate taxpayers): £1,000
Personal savings allowance (higher rate taxpayers): £500
Income limit for standard personal allowances: £100,000 (allowance completely lost once taxable income exceeds £123,000)
Blind person’s allowance: £2,320

**Transferable allowance available to married couples and civil partners who are not in receipt of married couple’s allowance.  The recipient spouse cannot be liable to higher or additional rate tax.

** Tax relief given at 10% where one partner was born before 6/4/1935

Personal Allowances 2016/17

Individuals (all): £11,000
Marriage allowance*: £1,100
Minimum married couples allowance**: £3,220
Maximum married couples allowance**: £8,355

Income limit for married couple’s allowances: £27,700 (allowances are abated if income limit exceeded)
Blind person’s allowance: £2,290
Dividend allowance: £5,000
Personal savings allowance (basic rate taxpayers): £1,000
Personal savings allowance (higher rate taxpayers): £500
Income limit for age-related personal and married couple’s allowances: £27,700 (allowances are abated if income limit exceeded)
Income limit for standard personal allowances: £100,000 (allowance completely lost once taxable income exceeds £122,000)

*Transferable allowance available to married couples and civil partners who are not in receipt of married couple’s allowance.  The recipient spouse cannot be liable to higher or additional rate tax.

**Tax relief given at 10% where one partner was born before 6/4/1935

Tax Rates for 2017/18

Starting rate for savings income* (0%): 0 to £5,000
Basic rate (20%): 0 to £33,500
Higher rate (40%): £33,501 to £150,000
Additional rate (45%): over £150,000

*The starting rate means that anyone whose total income is no more than their personal allowance plus £5,000, will not pay tax on their savings income.

The tax rate on company dividends is 7.5% for basic rate taxpayers, 32.5% for higher rate and 38.1% for additional rate taxpayers.  

Tax Rates for 2016/17

Starting rate for savings income* (0%): 0 to £5,000
Basic rate (20%): 0 to £32,000
Higher rate (40%): £32,001 to £150,000
Additional rate (45%): over £150,000

*The starting rate means that anyone whose total income is no more than their personal allowance plus £5,000, will not pay tax on their savings income.

The tax rate on company dividends is 7.5% for basic rate taxpayers, 32.5% for higher rate and 38.1% for additional rate taxpayers.  The 10% tax credit is given for the “tax paid at source” on the dividends ceased to apply from 6 April 2016.

Child Benefit

For every £100 of income over £50,000, a tax charge will apply equivalently to 1% of the Child Benefit received by the family. This will lead to the complete withdrawal of Child Benefit at £60,000 of net income.

This tax charge is collected via the Self-Assessment tax return process from the higher earning partner in the family.

If you want to consider possible planning to mitigate the charge, please contact us regarding possible re-distribution of income within your family, to reduce the impact of the withdrawal of Child Benefit.

Pension Contributions

Annual Allowance: 2017/18*: £40,000 (2016/17 – £40,000)
Lifetime Allowance: 2017/18: £1,000,000 (2016/17 – £1,000,000)

*New rules came into effect on 6 April 2016, restricting the pension Annual Allowance for individuals whose annual income exceeds £150,000 including the value of their pension savings. Please contact us if you wish to discuss this in more detail.

The annual pension input, whether contributions are paid by the individual, the employer, or calculated as a deemed rise in the value of a defined benefit final salary scheme, must not exceed the Annual Allowance if a tax charge is to be avoided.

Each individual has an Annual Allowance for the current year, plus potentially unused Annual Allowances brought forward from the previous three tax years. If the value of the contributions/input made to the pension scheme exceeds the individual’s Annual Allowance, a tax charge applies on the excess contributions, set at the taxpayer’s highest rate of income tax.

The Lifetime Allowance (LTA) sets the maximum tax-deductible UK pension savings an individual can have during their lifetime.  This was reduced from £1,250,000 for the 2015/16 year.  Under certain circumstances it may be possible to apply to HMRC for protection against the reduction in the LTA.  If you would like to discuss this further please feel free to contact us.

Independent Savings Accounts (ISAs)

For those aged 16 or over, in the 2017/18 year up to £20,000 (2016/17: £15,240), can be invested in cash or stocks and shares in any proportion.  The Junior ISA/Child Trust Fund (CTF) limit is £4,128 for the 2017/18 year (£4,080 for 2016/17).

Capital Gains Tax

The rates for 2017/18 are:

Annual exemption: £11,300
Annual exemption for most trustees: £5,650
Rate for gains within basic rate band for income tax after taking into account other taxable income: 10% (18% in certain circumstances, e.g. sale of residential property, “carried interest”).
Rate for gains above basic rate band for income tax relief after taking into account other taxable income: 20% (28% in certain circumstances, e.g. sale of residential property, “carried interest”).
Rate for gains subject to Entrepreneurs’ Relief: 10%
Lifetime limit for Entrepreneurs’ Relief: £10,000,000
Rate for gains subject to Investors’ Relief: 10%
Lifetime limit for Investors’ Relief: £10,000,000

In broad terms only UK resident individuals pay CGT on gains but non-residents of the UK potentially will be liable to UK CGT if they sell residential UK properties.  There are also some complex rules for those individuals who are non-domiciled and/or become “temporary non-residents”.

Inheritance Tax

The Inheritance Tax (IHT) nil rate band remains frozen. This is the amount of a person’s estate that is free of inheritance tax when they die. Gifts made to charities are exempt from IHT. Transfers to UK domiciled spouses/civil partners are exempt.

From April 2017 onwards, the Government is introducing a new “main residence nil-rate band” which will apply when a residence is passed on death to a direct descendant and it will be in addition to the existing nil-rate band.  The main residence nil-rate band will initially be worth £100,000 and will then increase gradually to £175,000 by April 2020.

Transfers from a UK domiciled to a non-UK domiciled spouse/civil partner have a £325,000 exemption in addition to the £325,000 nil rate band outlined below (i.e. a UK domiciled individual can gift up to £650,000 to their non-UK domiciled spouse free from IHT).

Non-domiciled individuals with UK domiciled spouses/civil partners can also elect to be treated as domiciled in the UK for IHT purposes only if they wish.

The limits and rates for 2017/18 are:

Nil rate band: £325,000 (2016/17 – £325,000)
Rate payable on death: 40% (2016/17 – 40%)
Rate payable when 10% of estate left to charity: 36% (2016/17 – 36%)
Rate payable on lifetime gifts above the nil rate band: 20% (2016/17 – 20%)

Stamp Duty Land Tax (SDLT)

SDLT is paid on the purchase of a property in the UK.

SDLT Rates

Residential Property: From 4 December 2014 the SDLT system has changed to a banded system for residential property so that each rate applies to the element of the purchase price falling within that band.

Property Value

SDLT Rate

First £125,000

Nil

£125,000 up to £250,000

2%

£250,000 up to £925,000

5%

£925,000 up to £1.5m

10%

Anything above £1.5m

12%

* £150,000 for disadvantaged areas

 

You will usually have to pay 3% on top of the normal SDLT rates if buying a new residential property which means you will own more than one residential property (either a second home or a buy-to-let).

A flat rate of 15% of the entire purchase price applies to residential property purchased by Non-Natural Persons such as companies, collective investment schemes, or partnerships where a member is a company or a collective investment scheme.

Commercial Property: From 17 March 2016 the SDLT system for commercial property has also  changed to a banded system for residential property so that each rate applies to the element of the purchase price falling within that band.

Property Value

Rate

£150,000 or less

Nil

£150,001 to £250,000

2%

£250,001 +

5%

 Annual Tax on Enveloped Dwellings (ATED)

From April 2013 an annual tax charge may also be applied to the value of residential properties owned by non-natural persons such as companies, where each property is worth over £2 million.

The ATED charge payable for 2017/18  and 2016/17 depends on the value of the property:

 Property Value

2017/18 Charge

2016/17 Charge

£500,000 to £1,000,000

£3,500

£3,500

 £1,000,001 to £2,000,000

£7,050

£7,000

 £2,000,001 to £5,000,000

£23,550

£23,350

£5,000,001 to £10,000,000

£54,950

£54,450

£10,000,001 to £20,000,000

£110,100

£109,050

£20,000,001 +

£220,350

£218,200

The ATED return and payment must be made by 30 April at the start of each tax year. Several reliefs from ATED are available, such as full relief for properties let out on a commercial basis to unconnected parties.

Stamp Duty

Stocks and Shares

Rate

If duty exceeds £5

0.5%

Tax Rates & Allowance for Businesses

Corporation Tax

From April 2015 (FY2015 onwards) there has been a single 20% rate of corporation tax.  From April (FY2017 onwards) this rate is reducing to 19%.

 

Capital Allowances

The rates and thresholds of the main capital allowances will apply as follows for 2017/18:

Main pool: Writing Down Allowance: 18%
Special rate pool (including high emission cars): Writing Down Allowance: 8%
Low emission cars (CO2 emissions less than 130g/km): Writing Down Allowance: 18%

Annual Investment Allowance from 1 January 2015: 100% capped on an expenditure of £200,000 per year.

Employers

National Insurance Contributions (NIC)

For 2017/18 the main rates and thresholds for NIC are:

Lower Earnings Limit (LEL) for Class 1 NICs: £113/week
Employer’s Class 1 above £157/week: 13.8%
Employee’s Class 1 from £157 to £866/week: 12%
Employee’s additional Class 1 above £866/week: 2%
Self-employed Class 4 from £8,164 to £45,000 per annum: 9%
Self-employed Class 4 additional rate above £45,000 per annum: 2%
Self-employed Class 2: £2.85 per week
Voluntary contributions Class 3: £14.25 per week

The Government is consulting on its intentions to integrate the administration of income tax and NIC for employers and the self-employed.

Share Schemes

The Government wants to encourage more employees to acquire shares in their employing companies. Small and medium sized companies can use the Enterprise Management Incentive (EMI) share option scheme to grant share options to employees, but there has been a £250,000 cap on the value of share options each employee can acquire from 16 June 2012 onwards.

Cars and Car Fuel

Car Benefit

The tax scale charge for the private use of a company car by employees is calculated on a percentage of the list price of that car when new, the percentage being based on how “green” the car is i.e. the vehicle’s CO2 emissions.

From 6 April 2017 cars with CO2 emissions:

  • Of up to 50 g/km: will be taxed at 9% (12% if diesel) of list price (7% in 2016/17).
  • From 51-75g/km: will be taxed at 13% (16% if diesel) of list price (11% in 2016/17).
  • From 76-94g/km: will be taxed at 17% (20% if diesel) of list price (15% in 2016/17).
  • Each additional 5 g/km: will be taxed at a further 1% of list price to a maximum of 37% (40% for diesel cars) for 190g/km CO2 or more (200g/km CO2 in 2016/17).

Vans available for private use attract a scale charge of £3,230 (£3,170 in 2016/17).

Fuel Benefit

Where a company car driver receives free fuel for private use, the taxable scale charge is calculated as a percentage of a national list price for the car, currently £22,600 (£22,200 in 2016/17).  The charge is calculated by applying the above percentages according to the level of the car’s CO2 emissions.

The taxable benefit when fuel is provided for private use in a company van is £610 (£598 in 2016/17).

VAT

The UK VAT rates remain unchanged and are:

Reduced rate: 5%
Standard rate: 20%

The registration and deregistration annual turnover limits from April 2017 are:

Registration turnover: £83,000 (£83,000 in 2016/17)
Deregistration turnover: £81,000 (£81,000 in 2016/17)

For an initial consultation please call us on 01962 856 990 or visit our contact page.