Personal Taxation

Income tax allowances and reliefs

2017/18

2016/17

Personal (basic)

£11,500

£11,000

Personal reduced by £1 for every £2 of net income over

£100,000

£100,000

Transferable tax allowance for married couples/civil partners

£1,150

£1,100

Married couples/civil partners (minimum) at 10%1

£3,260

£3,220

Married couples/civil partners (maximum) at 10%1,2

£8,445

£8,355

Blind person’s allowance

£2,320

£2,290

Rent-a-room tax-free income

£7,500

£7,500

Venture capital trust (VCT) at 30%

£200,000

£200,000

Enterprise investment scheme (EIS) at 30%

£1,000,000

£1,000,000

– EIS eligible for capital gains tax (CGT) deferral relief

No limit

No limit

Seed EIS (SEIS) at 50%

£100,000

£100,000

– SEIS CGT reinvestment relief

50%

50%

Registered pension scheme

   

• annual allowance3

£40,000

£40,000

• money purchase annual allowance

£4,000

£10,000

• lifetime allowance

£1,000,000

£1,000,000

1 Where at least one spouse/civil partner was born before 6/4/35.

2 Reduced by £1 for every £2 of income over £28,000 (£27,700 2016/17), until the minimum is reached.

3 50% taper down to £10,000 if threshold income is over £110,000 and adjusted income is over £150,000.

Rates

2017/18

2016/17

Basic rate of 20% on income up to:

UK (excl. Scotland)

£33,500

£32,000

Scotland4

£31,500

£32,000

Higher rate of 40% on income over:

UK (excl. Scotland)

£33,500

£32,000

Scotland4

£31,500

£32,000

Additional rate of 45% on income over:

UK

£150,000

£150,000

Starting rate at 0% – on savings income up to5

£5,000

£5,000

Savings allowance at 0% tax:

basic rate taxpayers

£1,000

£1,000

higher rate taxpayers

£500

£500

additional rate taxpayers

£0

£0

Dividend allowance at 0% tax – all individuals

£5,000

£5,000

Tax rate on dividend income:

basic rate taxpayers

7.5%

7.5%

higher rate taxpayers

32.5%

32.5%

additional rate taxpayers

38.1%

38.1%

4 For non-dividend, non-savings income only in 2017/18: otherwise UK (excl. Scotland) band applies.

5 Not available if taxable non-savings income exceeds the starting rate band.

 

Trusts

• standard rate band generally £1,000 £1,000

• dividends (rate applicable to trusts) 38.1% 38.1%

• other income (rate applicable to trusts) 45% 45%

Child benefit charge: 1% of benefit per £100 of income between £50,000 and £60,000.

 

Income tax

The personal allowance will increase to £11,500 and the higher rate threshold will rise by £2,000 to £45,000 for 2017/18. In Scotland, the 2017/18 higher rate tax threshold will remain unchanged at £43,000 for non-savings, non-dividend income only.

National insurance contributions

The national insurance contribution (NIC) upper earnings limit and upper profits limit will increase to £45,000 for 2017/18, in line with the higher rate income tax threshold.

Class 4 NICs will increase from 9% to 10% in April 2018, coinciding with the abolition of Class 2 NICs. A further increase to 11% is set for April 2019.

Dividend allowance

The tax-free dividend allowance, which was introduced at a level of £5,000 in 2016/17, will be reduced to £2,000 from 2018/19.

Different forms of remuneration

  • Benefits in kind The government will publish a call for evidence on exemptions and valuation methodology for the income tax and employer NICs treatment of benefits in kind (BiKs). Legislation in Finance Bill 2017 will set the date of 6 July for an employee to make good on BiKs which are not accounted for in real time through PAYE (BiKs that are not payrolled). This legislation will take effect for tax liabilities arising from 2017/18.
  • Accommodation benefits The government will publish a consultation with proposals to update the tax treatment of employer-provided accommodation and board and lodging. This will include proposals for when accommodation should be exempt from tax.
  • Employee expenses The government will publish a call for evidence on the use of the income tax relief for employees’ expenses, including those that are not reimbursed by their employer.

Tax-advantaged venture capital schemes

The requirements of the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) will be amended, as previously announced, to:

  • Clarify the EIS and SEIS rules for share conversion rights;
  • Provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures, for investments made on or after 6 April 2017; and
  • Introduce a power to make VCT regulations in relation to certain share for share exchanges to provide greater certainty to VCTs, which will be effective from the date of Royal Assent.

Disguised remuneration

Legislation in Finance Bill 2017 will tackle the existing use of disguised remuneration avoidance schemes and prevent their future use, as previously announced.

Off-payroll working in the public sector

Legislation will reform the off-payroll rules and improve tax and NIC compliance in the public sector. Responsibility for operating the off-payroll working rules and deducting any tax and NIC due will move to the public sector body, agency or other third party paying an individual’s personal service company. The change will come into effect from 6 April 2017. It will be optional for the public body to take account of the worker’s expenses when calculating the tax due.

Reform of tax treatment of termination payments

Legislation will tighten and clarify the tax and NIC treatment of termination payments. The changes will take effect from 6 April 2018.


saver

Don’t lose your personal allowance. Your personal allowance of £11,500 in 2017/18 is reduced by 50p for every pound your income exceeds £100,000. Make a pension contribution or a charitable gift to bring your income below £100,000.


don’t forget

EIS investments offer CGT deferral. With the drop in most CGT rates, relating back the relief for an EIS investment could cut your tax bill on gains you made before 2016/17.


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