Tax facts
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The following tax facts should be viewed as an indication of the rates and allowances available and relate to the current tax year (2013/14) unless stated otherwise. Tax law is notoriously complex and we cannot replicate every rule, nuance or exemption here. Therefore you should not make, or refrain from making, any decisions based on this information alone. If you are in any doubt as to the suitable course of action we recommend you seek tax advice. Remember tax rules can change and depend on your personal circumstances.
- Income tax allowances
- Capital gains tax
- Inheritance tax
- Stamp duty
- Trusts
- State pension
- Pension contributions & tax relief
- National Insurance contributions
Income tax allowances and bands
Please note it is taxable income which applies in this assessment, including earnings, pensions in payment, cash interest, fixed interest income, dividends and rent. ISA income is not included.
Those born after 5 April 1948
| Income bands (2013/14) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance | £1 - £9,440 | 0% | 10% |
| Basic rate tax band (1) | £9,441 - £41,450 | 20% | 10% |
| Higher rate tax band (2) | £41,451 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 45% | 37.5% |
| Income bands (2012/13) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance | £1 - £8,105 | 0% | 10% |
| Basic rate tax band (1) | £8,106 - £42,475 | 20% | 10% |
| Higher rate tax band (2) | £42,476 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 50% | 42.5% |
Those born 6 April 1938 to 5 April 1948
| Income bands (2013/14) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance (4) | £1 - £10,500 | 0% | 10% |
| Basic rate tax band (1)(3) | £10,501 - £42,510 | 20% | 10% |
| Higher rate tax band (2) | £42,511 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 45% | 37.5% |
| Income bands (2012/13) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance (4) | £1 - £10,500 | 0% | 10% |
| Basic rate tax band (1)(3) | £10,501 - £42,475 | 20% | 10% |
| Higher rate tax band (2) | £42,476 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 50% | 42.5% |
Those born before 6 April 1938
| Income bands (2013/14) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance (4) | £1 - £10,660 | 0% | 10% |
| Basic rate tax band (1)(3) | £10,661 - £42,670 | 20% | 10% |
| Higher rate tax band (2) | £42,671 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 45% | 37.5% |
| Income bands (2012/2013) | Income tax rate | Dividend tax rate | |
|---|---|---|---|
| Personal Allowance (4) | £1 - £10,660 | 0% | 10% |
| Basic rate tax band (1)(3) | £10,661 - £42,475 | 20% | 10% |
| Higher rate tax band (2) | £42,476 - £150,000 | 40% | 32.5% |
| Additional rate tax band | £150,001 and over | 50% | 42.5% |
Important notes
(1) For savings income there is a 10% starting rate tax band of £2,790 above the personal allowance. However if your non-savings income is above this limit then the 10% starting rate for savings will not apply.
(2) For all ages, the personal allowance reduces where taxable income is above £100,000 - by £1 for every £2 of income above this limit.
(3) For those born before 6 April 1948 the personal allowance reduces where the income is above £26,100 - by £1 for every £2 of income above this limit. This will not fall below the basic personal allowance of £9,440 (2013/14) until income exceeds £100,000 as per (2).
(4) Age related allowances only apply to those born before the 6 April 1948.
Capital gains tax (CGT)
CGT is charged on any profits (the 'gains') you make when you sell (or transfer) shares and unit trusts or other assets such as a second home. If the total of any gains realised in the year, minus any losses, exceeds your annual allowance the excess is liable to CGT.
CGT has a different tax rate depending upon whether it applies to business assets or non-business assets.
Annual capital gains tax allowance: £10,900 (2013/14), £10,600 (2012/13)
2013/14 Capital gains tax rates (non-business assets)
| Tax rate | |
|---|---|
| Gains which when added to taxable income fall in the basic rate tax band | 18% |
| Gains which when added to taxable income fall in the higher or additional rate tax band | 28% |
2012/13 Capital gains tax rates (non-business assets)
| Tax rate | |
|---|---|
| Gains when added to taxable income of £42,475 or less | 18% |
| Gains when added to taxable income of £42,476 and above | 28% |
Entrepreneurs' Relief (Business assets)
Business assets are generally a share (or interest) in the company or firm you work for. You have to hold at least 5% of the shares to qualify.
| Tax rate | |
|---|---|
| First £10m of lifetime profit | 10% |
Inheritance tax (IHT)
Unchanged for 2013/14.
| Value of estate | Tax rate |
|---|---|
| £1 - £325,000 (known as IHT threshold or nil rate band) | 0% |
| £325,001 and over | 40% |
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Stamp duty
Stamp duty reserve tax (SDRT)
Charged when you buy shares that settle via electronic paperless systems.
| Tax rate | |
|---|---|
| Shares | 0.5% charge rounded up to the nearest penny |
Standard stamp duty
Charged when you buy shares that settle via a paper system.
| Value | Tax rate | |
|---|---|---|
| Shares | Less than £1,000 | 0% |
| Greater than £1,000 | 0.5% charge rounded up to £5 |
Stamp duty land tax (SDLT)
Charged when you buy land or property.
| Purchase price or value | Tax rate |
|---|---|
| Up to £125,000 | 0% |
| £125,000 to £250,000 | 1% |
| £250,000 to £500,000 | 3% |
| £500,000 to £1,000,000 | 4% |
| £1,000,000 to £2,000,000 | 5% |
| Over £2,000,000 | 7% |
Discretionary trusts
| Tax rate | |
|---|---|
| Income tax rate (above £1,000 per annum) | 45% for 2013/14 |
| Capital gains tax allowance | £5,450 |
| Capital gains tax rate | 28% |
| Inheritance tax (transfers into discretionary trusts) | 20% |
State Pension
Basic State Pension age
Historically the State Pension age was 60 for women and 65 for men. This is changing.
By November 2018 the State Pension age for women will have increased to 65. By October 2020 it will have increased to 66 for both men and women.The State Pension age is due to increase to 67 between 2034 and 2036 and to 68 between 2044 and 2046, however the government is considering bringing these increases forward.
Visit the State Pension age calculator on the pension advisory service's website.
Basic State Pension rate
| 2013/14 | |
|---|---|
| Maximum | £110.15 per week |
In addition, there may be entitlement to earnings related State Second Pension (S2P) formerly State Earnings Related Pension Scheme (SERPS).
You need 30 qualifying years for a full basic State Pension. A qualifying year is one where either sufficient national insurance has been paid (on earnings above a lower limit of £5,668 for this tax year) or deemed to have been paid. Visit the government's website for more information.
Request a forecast of your Basic State Pension
Pensions
Tax relief on pension contributions
| Tax status | Tax relief 2013/14* | Net cost of £1,000 gross contribution 2013/14 | Tax relief 2012/13* | Net cost of £1,000 gross contribution 2012/13 |
|---|---|---|---|---|
| Non-taxpayer (including children) | 20% | £800 | 20% | £800 |
| Basic rate taxpayer | 20% | £800 | 20% | £800 |
| Higher rate taxpayer | 40% | £600* | 40% | £600* |
| Additional rate taxpayer | 45% | £550* | 50% | £500* |
* Higher rate tax relief is restricted to the amount of higher rate tax paid. This assumes no other taxable income.
Find out more about the tax benefits of pensions
Pension contribution limits
| Relevant UK earnings (usually earnings from employment or self-employment) | Maximum contribution for tax relief |
|---|---|
| £0 - £3,600 | £3,600 |
| £3,601 and over | 100% of earnings |
Annual allowance: £50,000 (£40,000 for 2014/15). An annual limit on total pension contributions. Please see our annual allowance factsheet.
Lifetime allowance: £1,500,000 (£1,250,000 for 2014/15). If the value of pension rights exceeds the lifetime allowance on death, at retirement or at age 75, the excess could be taxed at up to 55%.
Attendance allowance
Attendance allowance is paid weekly. The amount paid depends on the extent of your disability.
| 2012/13 | 2013/14 | |
|---|---|---|
| Higher rate | £77.45 | £79.15 |
| Lower rate | £51.85 | £53.00 |
More details on the attendance allowance including eligibility criteria
National Insurance contributions
Class 1 employed (2013/14)
| Earnings per week | Employee rate |
|---|---|
| £0 to £149 | Nil |
| £149.01 to £797 | 12% |
| £797.01 and over | 2% |
| Earnings per week | Employer rate |
|---|---|
| £0 to £148 | Nil |
| £148.01 and over | 13.8% |
National Insurance applies to most earned income or benefits in kind. This assumes you are not contracted out.
Self employed and voluntary
| Type of National Insurance contribution | Tax rate 2013/14 | Tax rate 2012/13 |
|---|---|---|
| Class 2 self employed | £2.70 per week | £2.65 per week |
| Class 2 small earnings exception | £5,725 per annum | £5,595 per annum |
| Class 3 voluntary | £13.55 per week | £13.25 per week |
| Class 4 lower profits limit | £7,755 per year | £7,605 per year |
| Class 4 upper profits limit | £41,450 per year | £42,475 per year |
| Class 4 rate between lower profits limit and upper profits limit | 9% | 9% |
| Class 4 rate above upper profits limit | 2% | 2% |
FREE Guide to Saving Tax
With these tax saving tips you can hand over less of your profit and income to the taxman - meaning greater investment returns for you.
Request your copy