Tax matters

How much tax do we pay? This page summarises the main rates and allowances. The current tax year runs from 6 April 2017 to 5 April 2018.

Individual Savings Account (ISA) limits

Savings or investments held in ISAs are exempt from income and capital gains tax.

ISA limits
£ per year 2016-17 2017-18 Change (£)
* The overall limit applies to the total amount invested across all ISA accounts
Overall ISA limit* £15,240 £20,000 +4,760
Junior ISA £4,080 £4,128 +48
Help to Buy ISA £2,400 £2,400
Lifetime ISA £0 £4,000 +4,000

Income tax

Taxable income includes earnings, pension withdrawals, cash interest, fixed interest income, dividends and rent. Income from savings or investments held within an ISA are not taxed.

Income tax personal allowances
Allowance 2016-17 2017-18 Change (£)
The dividend and personal savings allowances apply after the personal allowance. Anything within these allowances still counts towards the basic and/or higher rate tax bands.
The personal allowance reduces by £1 for every £2 of income above £100,000, and is lost if taxable income exceeds £123,000 (2017/18).
The transferable tax allowance only applies where neither individual is a higher or additional rate tax payer.
Personal Allowance £11,000 £11,500 +£500
Transferable tax allowance for married couples/civil partners £1,100 £1,150 +£50
Personal Savings Allowance (PSA) £1,000 for Basic rate taxpayers
£500 for Higher rate taxpayers
Not available for Additional rate taxpayers
£1,000 for Basic rate taxpayers
£500 for Higher rate taxpayers
Not available for Additional rate taxpayers
Dividend Allowance £5,000 £5,000

Income tax bands

Income tax bands: UK excluding Scotland
Rate Tax Band Income tax rate Dividend tax rate
There is a 0% starting rate for savings income up to £5,000 that applies when total income is less than £16,500.
Higher rate threshold (standard personal allowance + basic rate band) is £45,000. Non-savings income uses up the starting rate for savings.
Basic rate £0 – £33,500 20% 7.5%
Higher Rate £33,501 – £150,000 40% 32.5%
Additional Rate £150,000+ 45% 38.1%
Income tax bands: Scotland only
Rate Tax Band Income tax rate Dividend tax rate
Higher rate threshold (Standard personal allowance + basic rate band) is £43,000. Non-savings income uses up the starting rate for savings.
Basic rate £0 – £31,500 20% 7.5%
Higher Rate £31,501 – £150,000 40% 32.5%
Additional Rate £150,000+ 45% 38.1%

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. Capital gains are taxed differently from income, and you have a separate personal allowance for capital gains (in addition to your personal allowance for income). CGT is charged differently for business and non-business assets.

Personal allowance for capital gains
Allowance 2016-17 2017-18 Change (£)
Personal Allowance £11,100 £11,300 +£200
Capital gains tax rates (for non-business assets)
Capital gains Standard rate Residential rate*
* Capital gains on residential property which is not a main residence incur a tax surcharge.
Gains which when added to taxable income fall in the basic rate tax band 10% 18%
Gains which when added to taxable income fall in the higher or additional rate tax band 20% 28%

Inheritance tax (IHT)

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

Additional nil rate band for residences

If you are passing on your home to your direct descendents (children, grandchildren etc.) and it falls within your estate, then there is an additional nil rate band. However, for estates valued at more than £2 million, the additional threshold (and any transferred additional threshold) will be gradually withdrawn or tapered away. This band is due to increase annually as follows:

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

Visit GOV.UK for more information on IHT

Stamp duty land tax (SDLT)

SDLT is charged when you buy residential land or property.

Stamp duty land tax
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%

Visit GOV.UK to calculate how much SDLT is due on a property

Discretionary trusts

Tax on 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%

Visit GOV.UK for more information on trusts and income tax

Pensions

Tax relief on pension contributions has not changed since 2016/17.

Tax relief on pension contributions
Tax status Tax relief Net cost of £1,000 gross contribution
* Higher/additional rate tax relief is restricted to the amount of higher/additional rate tax paid. This assumes no other taxable income.
Non-taxpayer (including children) 20% £800
Basic rate taxpayer 20% £800
Higher rate taxpayer 40% £600*
Additional rate taxpayer 45% £550*

Limits to pension contributions

The amount you can contribute to a pension (and still benefit from tax relief) depends on your earnings. However, this is subject to an Annual Allowance of £40,000, and for high earners, the Annual Allowance is subject to tapering, down to a minimum of £10,000.

If you have already flexibly accessed your pension (e.g. in drawdown), then a reduced Money Purchase Annual Allowance applies. This was due to fall to £4,000, but the measure is currently on hold pending the UK election.

In addition to these limits, there is an overall Lifetime Allowance of £1,000,000 on the total value of your pension rights. If the value of your pensions exceeds £1 million on death, at retirement or at age 75, the excess could be taxed at up to 55%.

Visit GOV.UK for more information on the pension annual allowance

Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail