Hargreaves Lansdown

Tax facts

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

The following tax facts should be viewed as an indication of the rates and allowances available and relate to the current tax year (2016/2017) 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 06/04/2016

Shortcuts


Income tax - main personal allowances

2016/17
Personal Allowance £11,000
Transferable tax allowance for married couples/civil partners £1,100
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 dividend allowance applies after the personal allowance. Dividends within the dividend allowance still count towards the basic and/or higher rate tax bands.

The Personal Savings Allowance and Dividend Allowance is disregarded when determining whether an individual is a Basic, Higher or Additional rate taxpayer for the purpose of eligibility for the Personal Savings Allowance.

Income tax - bands

2016/17
Starting rate for savings only £0 - £5,000
Basic rate £0 - £32,000
Higher rate £32,001 - £150,000
Additional rate £150,000+
Higher rate threshold (Standard personal allowance + basic rate band) £43,000

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

FREE Guide to ISAs

Learn how Cash and Stocks & Shares ISAs can help you save tax and understand how to make more of your ISA investments.

Request your copy

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 and 2016/17)

2016/17 Capital gains tax rates (non-business assets)

                       
                     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.

                       
                     Tax rate   
        First £10m of lifetime profit            10%   
        Long-term investment in unlisted companies, first £10m of lifetime profit*            10%   

*Only applies for qualifying shares bought on or after 17 March 2016 and held for at least three years from 6 April 2016.

Inheritance tax (IHT)

Announced 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%   

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
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 rate
Income tax rate (above £1,000 per annum) 45%
Capital gains tax allowance £5,550
Capital gains tax rate 20%
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 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 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

  2016/17
Maximum £119.30 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.

New State Pension rate - for those who reached State Pension age on or after 6 April 2016

  2016/17
Maximum £155.56 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 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.

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 2015/16* Net cost of £1,000 gross contribution 2015/16 Tax relief 2016/17* Net cost of £1,000 gross contribution 2016/17
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 £10,000 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 Guide to SIPPs

Our straightforward, easy-to-read guide gives you a run-down on SIPPs and why they are transforming the way people are saving for retirement.

Request your copy

Attendance allowance

Attendance allowance is paid weekly. The amount paid depends on the help you need.

     
  2015/16 and 2016/17
Higher rate £82.30
Lower rate £55.10

More details on the attendance allowance including eligibility criteria

National Insurance contributions

Class 1 employed (2016/17)

Earnings per week Employee rate
£0 to £155 Nil
£156 to £827 12%
£827 and over 2%
Earnings per week Employer rate
£0 to £156 Nil
£157 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 £827 for employees under 21 or apprentices under 25.

Self employed and voluntary

 
Type of National Insurance contribution Tax rate 2016/17
Class 2 self employed £2.80 per week
Class 2 small profits threshold £5,965 per annum
Class 3 voluntary £14.10 per week
Class 4 lower profits limit £8,060 per annum
Class 4 upper profits limit £43,000 per year
Class 4 rate between lower profits limit and upper profits limit 9%
Class 4 rate above upper profits limit 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