INCOME TAX RATES FOR THE NEW TAX YEAR

Income tax rates

2015/16          
2016/17          
2017/18
Basic rate
20%
20%
20%
Higher rate
40%
40%
40%
Additional rate
45%
45%
45%
Starting rate for savings rate (applicable to savings income up to £5,000)
0%
0%
0%
Savings allowance (0% tax applies to the first part of savings income):
Basic rate taxpayers
N/A
£1,000
£1,000
Higher rate taxpayers
N/A
£500
£500
Additional rate taxpayers
N/A
N/A
N/A
Higher rate applies to taxable income above (up to £150,000)
£31,785
£32,000
£33,500
Additional rate applies to taxable income above
£150,000
£150,000
£150,000
Dividend nil rate band (0% tax applies to the first £5,000 of dividends received)
N/A
£5,000
£5,000
Dividend rate up to basic rate limit
N/A
7.5%
7.5%
Dividend rate up to higher rate limit
32.5%
32.5%
32.5%
Dividend rate on income above higher rate limit
37.5%
38.1%
38.1%
Trusts:
Flat rate applicable to discretionary and accumulation trusts
45%
45%
45%
Dividend rate applicable to discretionary and accumulation trusts
37.5%
38.1%
38.1%

 

  • Before 6 April 2016 if not a higher rate taxpayer, the rate of tax on dividends was 10% on the gross amount, i.e. the dividends, plus the tax credit which is equal to one ninth of the dividend. For example, a dividend of £90 equals a gross dividend of £100. The 10% tax on this was covered by the 10% tax credit. From 2016/17 and later years individuals have a tax-free dividend allowance of £5,000. Dividends above this amount, but within the basic rate band, are taxed at 7.5%. The dividend you receive is the gross amount. There is no longer any 10% tax credit.
  • The savings rate of 0% applies to non-dividend income from savings, e.g. bank interest. The 0% rate does not apply if taxable non-savings income exceeds the savings rate limit. For 2016/17 a new personal savings allowance (PSA) is introduced. Basic rate taxpayers are able to receive up to £1,000 of savings income tax free. The limit is £500 for higher rate taxpayers. There is no personal savings allowance for additional rate taxpayers. The savings rate of 0% only applies after PSA.
  • For discretionary and accumulation trusts the standard rates apply to the first £1,000 of income; 7.5% for dividends and 20% for other types of income. The main rates in the table apply to income above £1,000.

Income tax allowances and reliefs

2015/16       
2016/17       
2017/18
Personal allowance
£10,600
£11,000
£11,500
Maximum transferable personal allowance
£1,060
£1,100
£1,150
Registered blind person’s allowance
£2,290
£2,290
£2,320
Age-related allowances:
Married couple’s allowance (MCA) for those born before 6 April 1935 – maximum
£8,355
£8,335
£8,445
MCA for those born before 6 April 1935 – minimum
£3,220
£3,220
£3,260

 

  • Personal allowances. Since 5 April 2010 personal allowances are withdrawn from those with taxable income above £100,000 at the rate of £1 for each £2 of taxable income received above that amount. The withdrawal that applies to the age allowance will apply to withdraw the personal allowance for income above £100,000.
  • Age-related allowances. Allowances are withdrawn at the rate of £1 for each £2 that the individual’s taxable income exceeds the limits shown in the table above.
  • For 2015/16 and later years one spouse or civil partner can transfer up to 10% of their unused personal allowances to their partner as long as neither is liable higher or additional rate tax.

Rent-a-room relief

  • For 2016/17 and 2017/18 rent-a-room relief is set at £7,500 (£4,250 for 2015/16 and earlier years). Individuals letting accommodation in their only or main residence, whether they themselves are resident at the same time, as furnished accommodation are exempt on “rent-a-room receipts” up to a limit of £7,500 a year.
  • Receipts in excess of £7,500 are taxed in full, but the taxpayer can elect to be taxed on their full rents under a normal rental business computation instead of using the rent-a-room relief. Under these rules the taxable amount is simply income (rents received less related expenses incurred).

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