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.
|£ per year||2017-18||2018-19||Change (£)|
|* The overall limit applies to the total amount invested across all ISA accounts|
|Overall ISA limit*||£20,000||£20,000||–|
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 bands
|Rate||2017-18||2018-19||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||£0 – £34,500||20%||7.5%|
|Higher Rate||£33,501 – £150,000||£34,501 – £150,000||40%||32.5%|
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.
|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)
|Value of estate||Tax rate|
|£1 – £325,000 (known as the nil rate band)||0%|
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valued at more than £2 million, the additional threshold (and any transferred additional threshold) will be gradually withdrawn or tapered away.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:
|Tax year||Residence nil rate band|
Stamp duty land tax (SDLT)
SDLT is 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%|
|Income tax rate (above £1,000 per annum)||45%|
|Capital gains tax allowance||£5,650||£5,850|
|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%|
Tax relief on pension contributions has not changed since 2016/17.
|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 of just £4,000 applies.
In addition to these limits, there is an overall Lifetime Allowance of £1,000,000 (in 2017-18, rising to £1,030,000 in 2018-19) on the total value of your pension rights. This 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%.