Tax matters
How much tax do we pay? This page summarises the main rates and allowances. The current tax year runs from 6 April 2018 to 5 April 2019.
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 | – |
| Junior ISA | £4,128 | £4,260 | +£132 |
| Lifetime ISA | £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.
| Allowance | 2017-18 | 2018-19 | 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 therefore lost completely if taxable income exceeds £123,000 (in 2017/18 – or £123,700 in 2018/19). The transferable tax allowance only applies where neither individual is a higher or additional rate tax payer. For Scottish tax payers, the situation is more complex. Visit https://www.gov.uk/scottish-rate-income-tax for further information. |
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| Personal Allowance | £11,500 | £11,850 | +£350 |
| Transferable tax allowance for married couples/civil partners | £1,150 | £1,185 | +£35 |
| 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 | £2,000 | -£3,000 |
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. |
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| Basic rate | £0 – £33,500 | £0 – £34,500 | 20% | 7.5% |
| Higher Rate | £33,501 – £150,000 | £34,501 – £150,000 | 40% | 32.5% |
| Additional Rate | £150,001+ | £150,001+ | 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.
| Allowance | 2017-18 | 2018-19 | Change (£) |
|---|---|---|---|
| Personal Allowance | £11,300 | £11,700 | +£400 |
| 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% |
| 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:
| Tax year | Residence nil rate band |
|---|---|
| 2017/18 | £100,000 |
| 2018/19 | £125,000 |
| 2019/20 | £150,000 |
| 2020/21 | £175,000 |
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% |
| Over £1,500,000 | 12% | 15% |
Visit GOV.UK to calculate how much SDLT is due on a property
Discretionary trusts
| Tax | 2017-18 | 2018-19 |
|---|---|---|
| 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% | |
Pensions
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 which has risen to £1,030,000 in 2018-19 on the total value of your pension rights. If the value of your pensions exceeds this amount 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
State pension
The state pension has gone by 3% for 2018-19. In real terms this means the state pension will increase by £3.65 a week to £164.34. The state pension is increased every year according to the ‘triple lock’ formula which means it increased by the highest of consumer price index inflation, earnings or 2.5 per cent.
