Hargreaves Lansdown

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 (2015/2016) 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.

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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. Income tax is generally charged per band of taxable: the personal allowance at 0%, basic rate at 20%, higher rate tax at 40% and additional rate tax at 45%. The bands are below:

Those born 6 April 1938 or after

Income bands (2015/16) Income tax rate Dividend tax rate
Personal Allowance £1 - £10,600 0% 10%
Basic rate tax band (1) £10,601 - £42,385 20% 10%
Higher rate tax band (2) £42,386 - £150,000 40% 32.5%
Additional rate tax band Over £150,000
45% 37.5%
Income bands (2014/15) Income tax rate Dividend tax rate
Personal Allowance £1 - £10,000 0% 10%
Basic rate tax band (1) £10,000 - £41,865 20% 10%
Higher rate tax band (2) £41,866 - £150,000 40% 32.5%
Additional rate tax band Over £150,000
45% 37.5%

Those born before 6 April 1938

Income bands (2015/16) Income tax rate Dividend tax rate
Personal Allowance (4) £1 - £10,660 0% 10%
Basic rate tax band (1)(3) £10,661 - £42,445 20% 10%
Higher rate tax band (2) £42,446 - £150,000 40% 32.5%
Additional rate tax band Over £150,000
45% 37.5%
Income bands (2014/2015) Income tax rate Dividend tax rate
Personal Allowance (4) £1 - £10,660 0% 10%
Basic rate tax band (1)(3) £10,661 - £42,525 20% 10%
Higher rate tax band (2) £42,526 - £150,000 40% 32.5%
Additional rate tax band Over £150,000 45% 37.5%

Important notes

(1) For savings income there is a 0% starting rate tax band of £5,000 above the personal allowance. However if your non-savings income is above this limit then the 0% 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, so that the personal allowance is lost once taxable income exceeds £121,200 (2015/16).

(3) For those born before 6 April 1938 the personal allowance reduces where the income is above £27,700 - by £1 for every £2 of income above this limit. This will not fall below the basic personal allowance of £10,600 (2015/16) until income exceeds £100,000 as per (2).

(4) Age related allowances only apply to those born before the 6 April 1938.

Transferable tax allowance for married couples/civil partners is £1,060 (Does not apply if one is a higher or additional rate taxpayer).

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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: £11,100 (2015/16), £11,000 (2014/15)

2015/16 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%
 

Entrepreneurs' Relief (Business assets)

Business assets are generally a share (or interest) in the company or firm you work for. Entrepreneurs' Relief is subject to meeting certain criteria - Please visit the HMRC website for more information.

  Tax rate
First £10m of lifetime profit 10%

Inheritance tax (IHT)

Unchanged for 2015/16.

Value of estate Tax rate
£1 - £325,000 (known as IHT threshold or nil rate band) 0%
Over £325,000 40%

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) - residential

Charged when you buy residential land or property.

Purchase price or value Tax rate paid on portion of purchase price
Up to £125,000 0%
£125,001 to £250,000 2%
£250,001 to £925,000 5%
£925,001 to £1,500,000 10%
Over £1,500,000 12%

Discretionary trusts

  Tax rate
Income tax rate (above £1,000 per annum) 45% for 2015/16
Capital gains tax allowance £5,550
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

  2015/16
Maximum £115.95 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 £5,824 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 2015/16* Net cost of £1,000 gross contribution 2015/16 Tax relief 2014/15* Net cost of £1,000 gross contribution 2014/15
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* 45% £550*

* 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: £40,000. An annual limit on total pension contributions. Please see our annual allowance factsheet.

Lifetime allowance: £1,250,000. 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%. This will reduce to £1 million from 6 April 2016.

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Attendance allowance

Attendance allowance is paid weekly. The amount paid depends on the extent of your disability.

     
  2015/16
Higher rate £82.30
Lower rate £55.10

More details on the attendance allowance including eligibility criteria

National Insurance contributions

Class 1 employed (2015/16)

Earnings per week Employee rate
£0 to £155 Nil
£156 to £815 12%
£815.01 and over 2%
Earnings per week Employer rate
£0 to £155 Nil
£156 and over 13.8%

National Insurance applies to most earned income or benefits in kind. This assumes you are not contracted out. National Insurance rates may be different for certain employees, e.g. if employee is over the State Pension age or a member of a contracted out final salary pension scheme. No National Insurance paid by employees under 21.

Self employed and voluntary

 
Type of National Insurance contribution Tax rate 2015/16 Tax rate 2014/15
Class 2 self employed £2.80 per week £2.75 per week
Class 2 small earnings exception £5,965 per annum £5,885 per annum
Class 3 voluntary £14.10 per week £13.90 per week
Class 4 lower profits limit £8,060 per annum £7,956 per year
Class 4 upper profits limit £42,385 per year £41,865 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.

guide Request your copy