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Tax facts

Tax facts

What you need to know about this year's rates and allowances

The following tax facts should be viewed as an indication of the rates and allowances available and relate to the current tax year (2017/2018) 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. Information believed to be correct as at 06/04/2017.

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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 - main personal allowances


Allowance 2017/18
Personal Allowance £11,500
Transferable tax allowance for married couples/civil partners £1,150
Personal Savings Allowance (PSA) £1,000 for Basic rate taxpayers
£500 for Higher rate taxpayers
Not available for Additional rate taxpayers
Dividend Allowance £5,000

A Married Couple’s allowance (born pre 6/4/35) or Blind Person’s allowance may also apply.

The transferrable tax allowance only applies where neither individual is a higher or additional rate tax payer.

The personal allowance reduces by £1 for every £2 of income above £100,000. The personal allowance is lost if taxable income exceeds £123,000 (2017/18).

The dividend and personal savings allowance apply after the personal allowance. Anything within these allowances still count towards the basic and/or higher rate tax bands.

Income tax - bands (after any personal allowance)

UK excluding Scotland


Rate Tax Band Income tax rate Dividend tax rate
Starting Rate for Savings £0 - £5,000 0% N/A
Basic rate £0 - £33,500 20% 7.5%
Higher Rate £33,501 - £150,000 40% 32.5%
Additional Rate £150,000+ 45% 38.1%

Higher rate threshold (standard personal allowance + basic rate band) is £45,000.

Non-savings income uses up the starting rate for savings.

Scotland only

Scottish tax bands only apply to earned or pension income. They do not apply to savings or dividend income.

Rate Tax Band Income tax rate Dividend tax rate
Starting Rate for Savings £0 - £5,000 0% N/A
Basic rate £0 - £31,500 20% 7.5%
Higher Rate £31,501 - £150,000 40% 32.5%
Additional Rate £150,000+ 45% 38.1%

Higher rate threshold (Standard personal allowance + basic rate band) is £43,000.

Non-savings income uses up the starting rate for savings.

Free ISA Guide Find out how you could save tax with this year's ISA and make more of your existing ISAs. Download your free ISA Guide

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: £11,300 2017/18

2017/18 Capital gains tax rates (non-business assets)

Capital gains Tax rate
Gains which when added to taxable income fall in the basic rate tax band 10%
Gains which when added to taxable income fall in the higher or additional rate tax band 20%
 

Capital gains on residential property which is not a main residence will be taxed at 18% and 28% instead of 10% and 20%.

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


Inheritance tax (IHT)


Announced IHT rates until 2020/21

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

Tax year Residence nil rate band
2017/18 £100,000
2018/19 £125,000
2019/20 £150,000
2020/21 £175,000

Please visit the HMRC website for more information

Stamp duty


Stamp duty reserve tax (SDRT)

0.5% rounded up to the nearest penny when you buy shares that settled via electronic paperless system.

Standard stamp duty

When you buy shares worth over £1,000 that settle via a paper system the tax charge is 0.5% rounded up to the nearest penny. There is no charge if the shares are worth less than £1,000.

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
Tax rate paid on second and subsequent houses
Up to £125,000 0% 3%
£125,001 to £250,000 2% 5%
£250,001 to £925,000 5% 8%
£925,001 to £1,500,000 10% 13%
Over £1,500,000 12% 15%

Discretionary trusts


Tax Tax rate
Income tax rate (above £1,000 per annum) 45%
Capital gains tax allowance £5,650
Capital gains tax rate 20% / 28% for residential property
Inheritance tax (transfers into discretionary trusts) 20%
Dividend tax rate (up to £1,000 per annum) 7.5%
Dividend tax rate (above £1,000 per annum) 38.1%

State Pension


State Pension age

Historically the State Pension age was 60 for women and 65 for men. This has changed.

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 2026 and 2028 and to 68 between 2044 and 2046, however the government is considering bringing these increases forward.

Visit the government's website for more information

Basic State Pension rate

For those who reached State Pension age before 6 April 2016, the maximum in 2017/18 is £122.30 per week.

In addition, there may be entitlement to earnings related State Second Pension (S2P) formerly State Earnings Related Pension Scheme (SERPS).

You needed 30 qualifying years for a full basic State Pension. A qualifying year is one where either sufficient national insurance was paid or was deemed to have been paid.

Visit the government's website for more information

New State Pension rate

For those who reached State Pension age on or after 6 April 2016, the maximum in 2017/18 is £159.55 per week.

This figure will be reduced for those who have contracted out of the State Second Pension (S2P), formerly State Earnings Related Pension Scheme (SERPS), before 6 April 2016.

35 qualifying years are needed to receive the full New State Pension. A qualifying year is one where either sufficient national insurance has been paid (on earnings above a lower limit of £5,876 for this tax year) or deemed to have been paid.

Transitional rules apply for those who accrued State Pension before 6 April 2016.

Visit the government's website for more information

Get a State Pension statement

 

Pensions


Tax relief on pension contributions

Tax status Tax relief 2016/17* Net cost of £1,000 gross contribution 2016/17 Tax relief 2017/18* Net cost of £1,000 gross contribution 2017/18
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/additional rate tax relief is restricted to the amount of higher/additional 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 personal or employee contribution for tax relief
£0 - £3,600 £3,600
£3,601 and over 100% of earnings

Annual allowance: £40,000. A £4,000 money purchase annual allowance will apply for those who have flexibly accessed their pensions.

Tapered annual allowance: If your threshold income is over £110,000 then your annual allowance will be reduced by £1 for every £2 that your adjusted income is over £150,000; to a minimum annual allowance of £10,000.

Threshold income is, broadly, all taxable income plus salary sacrificed for pension contributions on or after 9 July 2015 minus personal or employee (not via salary sacrifice) pension contributions.

Adjusted income is, broadly, all taxable income plus employer pension contributions (including via salary sacrifice) plus some benefit accrual in defined benefit, e.g. final salary, pension schemes.

Please see our annual allowance factsheet.

Lifetime allowance: £1,000,000. 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%.

Free SIPP Guide Our straightforward guide gives you a run-down on SIPPs and why they are transforming the way people are saving for retirement. Download your free SIPP Guide

National Insurance contributions


Class 1 employed (2017/18)

Earnings per week Employee rate
£0 to £157 Nil
£158 to £866 12%
£866 and over 2%
Earnings per week Employer rate
£0 to £157 Nil
£158 and over 13.8%

National Insurance applies to most earned income or benefits in kind. National Insurance rates may be different for certain employees, e.g. if employee is over the State Pension age. No National Insurance paid by employers up to £866 for employees under 21 or apprentices under 25.

Self-employed and voluntary

Type of National Insurance contribution Tax rate 2017/18
Class 2 self-employed £2.85 per week
Class 2 small profits threshold £6,025 per annum
Class 3 voluntary £14.25 per week
Class 4 lower profits limit £8,164 per annum
Class 4 upper profits limit £45,000 per year
Class 4 rate between lower profits limit and upper profits limit 9%
Class 4 rate above upper profits limit 2%