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Tax Rates and Allowances 2017/18

Many of the tax rates and allowances are fundamental to our business and personal lives and the most important ones for the 2017/18 tax year are summarised here. We are sure that you will find it a useful point of reference throughout the coming tax year but if you have any questions please do not hesitate to contact us.

You can see our Budget 2017 summary here, or the government’s summary here

 Please navigate our tax rates 2017/18 summary by using the tabs below.

Capital Allowances
  • The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However tax relief is available on certain capital expenditure in the form of capital allowances.
  • Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘integral features’), computers, cars, vans and similar equipment used in a business.
  • There are special rules for cars and certain ‘environmentally friendly’ equipment.
  • Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
  • The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
  • Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

AIA

  • Special rules apply to accounting periods straddling the dates in the tables below.
  • The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:

Annual limit

£
1 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000

AIA limits – sole traders and partnerships

Expenditure incurred:

Annual limit

£
6 April 2014 to 31 December 2015 500,000
From 1 January 2016 200,000

Other plant and machinery allowances

  • Expenditure upon which AIA is not given/claimed will obtain relief through the ‘main rate pool’ or the ‘special rate pool’ rather than each item being dealt with separately.
  • The annual rate of WDA is 18% in the ‘main rate pool’ and 8% in the ‘special rate pool’.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Cars

  • For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
  • AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.
  • The government has announced that for expenditure incurred on cars on or after 1 April 2018 the emissions limits for the main rate and FYA are reduced to 110 and 50 g/km respectively.

Cars acquired from April 2015

Emissions (g/km)

Pool

Allowance

≤75 Main rate 100% FYA
≤ 130 Main rate 18% WDA
>130 Special rate 8% WDA
Capital Gains Tax
  • CGT is payable by individuals, trustees and personal representatives (PRs). Companies pay corporation tax on their capital gains.
  • There are annual tax free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
  • For individuals net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
  • Gains which qualify for Entrepreneurs’ Relief  or Investors’ Relief are charged at 10% for the first £10m of qualifying gains.

Rates and annual exemption 2017/18

Individuals 2017/18
£
Exemption 11,300
Standard rate 10%**
Higher rate* 20%**

* For higher rate and additional rate taxpayers.

** Higher rates of 18% and 28% may apply to the disposal of certain residential property.

Trustees 2017/18
£
Exemption 5,650
Rate 20%
  • CGT is payable by individuals, trustees and personal representatives (PRs). Companies pay corporation tax on their capital gains.
  • There are annual tax free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
  • For individuals net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band .
  • Gains which qualify for Entrepreneurs’ Relief or Investors’ Relief are charged at 10% for the first £10m of qualifying gains.

Rates and annual exemption 2016/17

Individuals 2016/17
£
Exemption 11,100
Standard rate 10%**
Higher rate* 20%**

* For higher rate and additional rate tax payers.

** Higher rates of 18% and 28% may apply to the disposal of certain residential property.

Trustees 2016/17
£
Exemption 5,550
Rate 20%
Car, Van and Fuel Benefits
  • The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO2 emissions.
  • For diesel cars add a 3% supplement but the maximum is 37%.
  • The list price includes accessories.
  • The list price is reduced for capital contributions made by the employee up to £5,000.
  • Special rules may apply to cars provided for disabled employees.
  • For cars registered before 1 January 1998 and cars with no agreed CO2 emissions the charge is based on engine size.

Car benefit 2017/18

CO2 emissions (g/km)
(round down to nearest 5g/km for values above 95)
% of car’s list price taxed
0-50 9
51 up to 75 13
76 up to 94 17
95 18
100 19
105 20
110 21
115 22
120 23
125 24
130 25
135 26
140 27
145 28
150 29
155 30
160 31
165 32
170 33
175 34
180 35
185 36
190 and above 37
  • The car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO2 emissions.
  • For diesel cars add a 3% supplement but the maximum is 37%.
  • The list price includes accessories.
  • The list price is reduced for capital contributions made by the employee up to £5,000.
  • Special rules may apply to cars provided for disabled employees.
  • For cars registered before 1 January 1998 and cars with no agreed CO2 emissions the charge is based on engine size.

Car Benefit 2016/17

CO2 emissions (g/km)
(round down to nearest 5g/km for values above 95)
% of car’s list price taxed
0-50 7
51 up to 75 11
76 up to 94 15
95 16
100 17
105 18
110 19
115 20
120 21
125 22
130 23
135 24
140 25
145 26
150 27
155 28
160 29
165 30
170 31
175 32
180 33
185 34
190 35
195 36
200 and above 37
  • Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
  • The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
  • The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.
Car fuel benefit 2017/18
Fuel charge multiplier £22,600
  • Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
  • The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
  • The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.
Car fuel benefit 2016/17
Fuel charge multiplier £22,200

 

Van Benefit

  • Van benefit is chargeable if the van is available for an employee’s private use.
  • A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
  • The charges do not apply to vans if a ‘restricted private use condition’ is met throughout the year.
  • A reduced benefit charge may apply to vans which cannot emit CO2 when driven.
Van benefits 2017/18
Van benefit £3,230
Fuel benefit £610
  • Van benefit is chargeable if the van is available for an employee’s private use.
  • A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
  • The charges do not apply to vans if a ‘ restricted private use condition ‘ is met throughout the year.
  • A reduced benefit charge may apply to vans which cannot emit CO 2 when driven.
Van benefits 2016/17
Van benefit £3,170
Fuel benefit £598

 

Child Benefits
Child Benefit is receivable by a person responsible for each child until they reach 16, or 19 if they stay in education or training.If the person (or their spouse or partner) has ‘adjusted net income’ above £50,000 the person with the highest income has to pay some of the Child Benefit as a tax charge.Where adjusted net income is more than £60,000 a year, the tax charge equals the Child Benefit received.

Rates – 2017/18 £ per week
Eldest/Only Child £20.70
Other Children £13.70
Child Benefit is receivable by a person responsible for each child until they reach 16, or 19 if they stay in education or training.If the person (or their spouse or partner) has ‘ adjusted net income ‘ above £50,000 the person with the highest income has to pay some of the Child Benefit as a tax charge.Where adjusted net income is more than £60,000 a year, the tax charge equals the Child Benefit received.

Rates – 2016/17 £ per week
Eldest/Only Child £20.70
Other Children £13.70
Corporation Tax
  • Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
  • If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
  • The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% in April 2018 if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.
Year to 31.3.18 Rate %
All profits 19
  • Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
  • If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
Year to 31.3.17 Rate %
All profits 20
Income Tax Rates
  • Income tax applies to the amount of income after deduction of personal allowances.
  • Income is taxed in a specific order with savings and dividend income taxed last.
  • Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
  • The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.
  • For 2017/18 the Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents.

Income tax rates 2017/18

Band of taxable income Rate Rate if dividends
£ % %
0 – 5,000 Starting rate for savings 0 N/A
0 – 33,500 Basic rate 20 7.5
33,501 – 150,000 Higher rate 40 32.5
Over 150,000 Additional rate 45 38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers 1,000 0
Higher rate taxpayers 500 0
Additional rate taxpayers Nil N/A
Dividend Allowance
for all taxpayers 5,000 0
  • Income tax applies to the amount of income after deduction of personal allowances.
  • Income is taxed in a specific order with savings and dividend income taxed last.
  • Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
  • The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.

Income tax rates 2016/17

Band of taxable income Rate Rate if dividends
£ % %
0 – 5,000 Starting rate for savings 0 N/A
0 – 32,000 Basic rate 20 7.5
32,001 – 150,000 Higher rate 40 32.5
Over 150,000 Additional rate 45 38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers 1,000 0
Higher rate taxpayers 500 0
Additional rate taxpayers Nil N/A
Dividend Allowance
for all taxpayers 5,000 0

Scotland

  • Income tax applies to the amount of income after deduction of personal allowances.
  • For 2017/18 the Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents.
  • Income is taxed in a specific order with savings and dividend income taxed last.
  • Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
  • The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.

Income tax rates 2017/18

Band of taxable income Rate Rate if dividends
£ % %
0 – 5,000 Starting rate for savings 0 N/A
0 – 31,500 Basic rate 20 7.5
31,501 – 150,000 Higher rate 40 32.5
Over 150,000 Additional rate 45 38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers 1,000 0
Higher rate taxpayers 500 0
Additional rate taxpayers Nil N/A
Dividend Allowance
for all taxpayers 5,000 0
  • Income tax applies to the amount of income after deduction of personal allowances.
  • For 2016/17 Scottish taxpayers pay income tax at the same effective rates that apply to the rest of the United Kingdom.
  • Income is taxed in a specific order with savings and dividend income taxed last.
  • Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
  • The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.
Band of taxable income Rate Rate if dividends
£ % %
0 – 5,000 Starting rate for savings 0 N/A
0 – 32,000 Basic rate 20 7.5
32,001 – 150,000 Higher rate 40 32.5
Over 150,000 Additional rate 45 38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers 1,000 0
Higher rate taxpayers 500 0
Additional rate taxpayers Nil N/A
Dividend Allowance
for all taxpayers 5,000 0
Income Tax Allowances
A personal allowance gives an individual an annual amount of income free from income tax.Income above the personal allowances is subject to income tax.The personal allowance will be reduced if an individual’s ‘adjusted net income’ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.An individual born before 6 April 1935 may be entitled to a married couple’s allowance but this is reduced if ‘adjusted net income’ is above the married couple’s allowance income limit (see table below).Marriage allowance – 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple’s allowance.
Income tax personal allowances 2017/18 £
Personal Allowance 11,500
Marriage Allowance 1,150
Blind person’s allowance 2,320
Married couple’s allowance
Either partner born before 6 April 1935
– Maximum reduction in tax bill 844.50
– Minimum reduction in tax bill 326.00
Married couple’s allowance income limit
Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income‘ above this limit
28,000

 

A personal allowance gives an individual an annual amount of income free from income tax.Income above the personal allowances is subject to income tax.The personal allowance will be reduced if an individual’s ‘ adjusted net income ‘ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.An individual born before 6 April 1935 may be entitled to an age related married couple’s allowance but this is reduced if ‘adjusted net income’ is above the married couple’s allowance income limit (see table below).Marriage allowance – 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. This Marriage allowance is not available to couples entitled to the Married Couple’s allowance.

Income tax personal allowances 2016/17 £
Personal Allowance 11,000
Marriage Allowance 1,100
Blind person’s allowance 2,290
Married couple’s allowance
Either partner born before 6 April 1935
– Maximum reduction in tax bill 835.50
– Minimum reduction in tax bill 322.00
Married couple’s allowance income limit
Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income’ above this limit
27,700
Property Allowance
  • From 6 April 2017 a property allowance of £1,000 per annum is introduced for individuals.
  • The property allowance will not apply to partnership income or to income on which rent a room relief is given.
Income up to £1,000 Profits assessable NIL
Income over £1,000 Election to deduct £1,000 rather than the actual expenses
Individual Savings Accounts
The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.Investors may transfer their investments from one kind of ISA to another.A Help to Buy ISA provides a tax free savings account for first time buyers wishing to save for a home. 
The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings. The bonus will be paid in the form of a voucher when the first home is purchased. Conditions apply to the account holder and to the property purchased.The Lifetime ISA is available for those aged between 18 and 40.
Save up to £4,000 each year up until the age of 50, and receive a government bonus of 25% (a bonus of up to £1,000 a year). Savers can use some or all of the money to buy their first home, or keep it until they are aged 60 when the account can be accessed tax free. Conditions apply to the account holder and property purchased.  Penalties apply if funds are withdrawn in other circumstances.

ISA limits 2017/18
Overall annual investment limit £20,000
Junior ISA annual investment limit £4,128
Help to Buy ISA monthly subscription limit (initial deposit limit £1,000) £200
Lifetime ISA annual investment limit £4,000
The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.Investors may transfer their investments from one kind of ISA to another.
A Help to Buy ISA provides a tax free savings account for first time buyers wishing to save for a home.The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.
The bonus will be paid in the form of a voucher when the first home is purchased. Conditions apply to the account holder and to the property purchased.

ISA limits 2016/17
Overall annual investment limit £15,240
Junior ISA £4,080
Help to Buy ISA monthly subscription limit (initial deposit limit £1,000) £200
Inheritance Tax
  • IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
  • Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
  • For 2017/18, a further nil rate band of £100,000 may be available in relation to current or former residences.
  • The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.
  • There are reliefs for some assets which reduce their value for IHT purposes.
  • IHT may also be payable on gifts made in an individual’s lifetime but within seven years of death.
  • Some lifetime gifts are exempt.
  • Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.
  • There are also charges on some trusts.

IHT rates and nil rate band 2017/18 and 2016/17

IHT nil rate £325,000
Lifetime rate 20%
Death rate 40%
Death rate if sufficient charitable legacies made 36%

IHT reliefs for lifetime gifts

Annual exemption £3,000
Small gifts £250
Marriage
– parent £5,000
– grandparent £2,500
– bride/groom £2,500
– other £1,000

IHT – reduced charge on gifts within seven years of death

Years before death % of death charge
0-3 100
3-4 80
4-5 60
5-6 40
6-7 20
Employee Statutory Pay Rates

Statutory pay

  • Payments may be required from an employer if an employee is not at work for a variety of reasons.
  • There are detailed conditions for an employee to qualify for any of these statutory payments.
  • Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

  • Payments may be required from an employer if an employee is too ill to work.
  • SSP is generally payable for a period up to 28 weeks.

Statutory Maternity Pay

  • Payments may be required from an employer when an employee takes time off to have a baby.
  • SMP is payable for a period up to 39 weeks.

Ordinary Statutory Paternity Pay

  • Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
  • Payment is for a period of either one or two complete weeks.

Shared Parental Pay

  • Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
  • Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

  • Payments may be required from an employer when an employee takes time off when they adopt a child.
  • Payment is for a period up to 39 weeks.
2017/18 Statutory pay rates –
average weekly earnings £113 or over
Statutory Sick Pay £89.35
Statutory Maternity Pay
First six weeks 90% of weekly earnings
Next 33 weeks £140.98*
Statutory Paternity Pay – 2 weeks £140.98*
Statutory Adoption Pay – 39 weeks
First six weeks 90% of weekly earnings
Next 33 weeks £140.98*
Shared Parental Pay £140.98*

*Or 90% of weekly earnings if lower.

Statutory pay

  • Payments may be required from an employer if an employee is not at work for a variety of reasons.
  • There are detailed conditions for an employee to qualify for any of these statutory payments.
  • Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

  • Payments may be required from an employer if an employee is too ill to work.
  • SSP is generally payable for a period up to 28 weeks.

Statutory Maternity Pay

  • Payments may be required from an employer when an employee takes time off to have a baby.
  • SMP is payable for a period up to 39 weeks.

Ordinary Statutory Paternity Pay

  • Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
  • Payment is for a period of either one or two complete weeks.

Shared Parental Pay

  • Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
  • Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

  • Payments may be required from an employer when an employee takes time off when they adopt a child.
  • Payment is for a period up to 39 weeks.
2016/17 Statutory pay rates –
average weekly earnings £112 or over
Statutory Sick Pay £88.45
Statutory Maternity Pay
First six weeks 90% of weekly earnings
Next 33 weeks £139.58*
Statutory Paternity Pay – 2 weeks £139.58*
Statutory Adoption Pay – 39 weeks
First six weeks 90% of weekly earnings
Next 33 weeks £139.58*
Shared Parental Pay £139.58*

*Or 90% of weekly earnings if lower.

Mileage Allowance Payments
  • MAPs represent the maximum tax free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.
  • An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.
  • If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

MAP rates per business mile 2017/18 and 2016/17

Cars and vans Rate per mile
Up to 10,000 miles 45p
Over 10,000 miles 25p
Bicycles 20p
Motorcycles 24p
National Insurance
  • Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
  • Employers pay Class 1 NIC in accordance with the table below.
  • Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold.
  • Employees’ Class 1 NIC stop when they reach their State Pension age. The employer’s contribution continues.

Employees – Class 1 – 2017/18

Earnings per week %
Up to £157 Nil*
£157.01 – £866 12
Over £866 2

* Entitlement to state pension and other contribution-based benefits is retained for earnings between £113 and £157 per week.

Employers – Class 1 – 2017/18

Earnings per week %
Up to £157 Nil
Over £157 13.8
Upper Secondary Threshold (for under 21s and apprentices under 25)
Up to £866
0%

Other National Insurance payable by employers

Class 1A – 13.8% on broadly all taxable benefits provided to employees

Class 1B – 13.8% on PAYE Settlement Agreements

Self-employed – Class 2 and 4

  • A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
  • Class 2 NIC stop when a person reaches State Pension age
  • Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2017/18

Flat rate per week £2.85
Small Profits Threshold* £6,025 per year

* No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.  

Class 4 – 2017/18

Annual profits %
Up to £8,164 Nil
£8,164.01 – £45,000 9
Over 45,000 2

Class 3

  • A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
  • Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2017/18

Flat rate per week £14.25

  • Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
  • Employers pay Class 1 NIC in accordance with the table below.
  • Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold.
  • Employees’ Class 1 NIC stop when they reach their State Pension age . The employer’s contribution continues.

Employees – Class 1 – 2016/17

Earnings per week %
Up to £155 Nil*
£155.01 – £827 12
Over £827 2

* Entitlement to state pension and other contribution-based benefits is retained for earnings between £112 and £155 per week.

Employers – Class 1 – 2016/17

Earnings per week %
Up to £156 Nil
Over £156 13.8
Upper Secondary Threshold (for under 21s and apprentices under 25)
Up to £827
0%

Other National Insurance payable by employers

Class 1A – 13.8% on broadly all taxable benefits provided to employees

Class 1B – 13.8% on PAYE Settlement Agreements

Self-employed – Class 2 and 4

  • A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
  • Class 2 NIC stop when a person reaches State Pension age
  • Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2016/17 and 2015/16

Flat rate per week £2.80
Small Profits Threshold* £5,965 per year

* No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.

Class 4 – 2016/17

Annual profits %
Up to £8,060 Nil
£8,060.01 – £43,000 9
Over 43,000 2

Class 3

  • A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
  • Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2016/17 and 2015/16

Flat rate per week £14.10

Pensions

Pensions: Auto Enrolment

Auto enrolment places new duties on employers to automatically enrol ‘workers’ into a work based pension scheme. Employers are required to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme and pay pension contributions on their behalf.

Phasing in of contributions

Employer minimum contribution Total minimum contribution
Employer’s staging date to 5 April 2018 1% 2%
6 April 2018 to 5 April 2019 2% 5%
6 April 2019 onwards 3% 8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

2017/18
Automatic enrolment earnings trigger £10,000
Qualifying earnings band – lower limit £5,876
Qualifying earnings band – upper limit £45,000
Auto enrolment places new duties on employers to automatically enrol ‘workers’ into a work based pension scheme. Employers are required to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme and pay pension contributions on their behalf.

Phasing in of contributions

Employer minimum contribution Total minimum contribution
Employer’s staging date to 5 April 2018 1% 2%
6 April 2018 to 5 April 2019 2% 5%
6 April 2019 onwards 3% 8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

2016/17
Automatic enrolment earnings trigger £10,000
Qualifying earnings band – lower limit £5,824
Qualifying earnings band – upper limit £43,000

 

Pensions: Tax Relief on Pension Contributions

  • Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
  • Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
  • The limit may be reduced to £10,000 (reducing to £4,000 from 6 April 2017) once money purchase pensions are accessed.
  • Where the £40,000 (previously £50,000 for tax years to 2013/14) limit is not fully used it may be possible to carry the unused amount forward for three years.
  • The annual allowance is tapered for those with adjusted income over £150,000. For every £2 of income over £150,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000.
  • Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.

 

State Pensions

  • The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age.
  • The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
  • To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
  • From 2016 the State Pension has been reformed into a new single-tier state pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any new State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
  • Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.
Weekly State Pension 2017/18
Basic – single person £122.30
Basic – married couple £195.60
New state pension £159.55
    • The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age .
    • The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
    • To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
    • From 2016 the State Pension has been reformed into a new single-tier state pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any new State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
    • Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.
Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

LBTT (Residential property)

Consideration (£) Rate
0 – 145,000 0%
145,001 – 250,000 2%
250,001 – 325,000 5%
325,001 – 750,000 10%
750,001 and above 12%

The rates apply to the portion of the total value which falls within each band. Rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

LBTT (Non-residential)

Consideration (£) Rate
0 – 150,000 Nil
150,001 – 350,000 3%
Over 350,000 4.5%

The rates apply to the portion of the total value which falls within each band.

Stamp Duty and Stamp Duty Land Tax
  • SDLT is payable on land and property transactions in England, Wales and Northern Ireland.
  • Property transactions in Scotland are subject to Land and Buildings Transaction Tax.
  • From April 2018, Land Transaction Tax (LTT) will replace SDLT in Wales.

Residential property

The rates apply to the portion of the total value which falls within each band.

Consideration (£) Rate
0 – 125,000 0%
125,001 – 250,000 2%
250,001 – 925,000 5%
925,001 – 1,500,000 10%
1,500,001 and above 12%

From April 2016 these rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

Non-residential SDLT rates

Consideration (£) Rate
0 – 150,000 0%
150,001 – 250,000 2%
Over 250,000 5%

Payable on consideration which falls in each band.

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy shares electronically Stamp Duty Reserve Tax (SDRT) is payable. For shares purchased using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.
Self Assessment - Key Dates

31 January 2017 – First payment on account due for 2016/17 tax year.

31 January 2017 – Deadline for filing electronic tax returns for 2015/16. Balancing payment due for 2015/16 tax year. First payment on account due for 2016/17 tax year.

31 July 2017 – Second payment on account for 2016/17 tax year.

5 October 2017 – Deadline for notifying HMRC of new sources of income (including the Child Benefit charge) if no tax return has been issued for 2016/17 tax year.

31 October 2017 – Deadline for submission of 2016/17 non-electronic returns.

30 December 2017 – Deadline for submission of 2016/17 electronic tax returns if ‘coding out’ of any underpayment is required.

31 January 2018 – Deadline for filing electronic tax returns for 2016/17. Balancing payment due for 2016/17 tax year. First payment on account due for 2017/18 tax year.

Tax Relief for Individuals

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. Individuals are entitled to relief on investments in certain unquoted trading companies through EIS.

Maximum investment per annum £1,000,000
Income tax relief 30%
CGT treatment on disposal if held for 3 years Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

Seed Enterprise Investment Scheme (SEIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. A junior version of EIS known as the Seed Enterprise Investment Scheme (SEIS) has been introduced.

Maximum investment per annum £100,000
Income tax relief 50%
CGT treatment on disposal if held for 3 years Exempt

An individual who makes a capital gain on another asset and uses the amount of the gain in making a SEIS investment will not pay tax on 50% of the gain subject to certain conditions.

Social Investment Relief (SIR)

Social Investment Relief (SIR) is designed to encourage private individuals to invest in social enterprises including charities. Individuals are entitled to relief on their investment:

Maximum investment per annum £1,000,000
Income tax relief 30%
CGT treatment on disposal if held for 3 years Exempt

Capital gains from the disposal of other assets may be deferred by making a SIR investment.

(All reliefs are subject to detailed conditions being met.)

Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment. Individuals are entitled to relief on investments in VCTs.

Maximum investment per annum £200,000
Income tax relief 30%
Dividend income Exempt
Capital gains treatment on disposal Exempt
Trade Allowance
  • From 6 April 2017 a Trade Allowance of £1,000 per annum is introduced for individuals.
  • There will be an equivalent rule for certain miscellaneous income. This will apply to the extent that the £1,000 trading allowance is not used against trading income.
  • The trade allowance is not available against partnership income.
Income up to £1,000 Profits assessable NIL
Income over £1,000 Election to deduct £1,000 allowance rather than the actual expenses
Value Added Tax
  • Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
  • Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
  • There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
  • Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
  • A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.

 

VAT – rates and limits 2017/18
Standard rate 20%
Reduced rate 5%
Annual Registration Limit
– from 1.4.17 – 31.3.18
£85,000
Annual Deregistration Limit
– from 1.4.17 – 31.3.18
£83,000

 

  • Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
  • Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
  • There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
  • Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
  • A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.

 

VAT – rates and limits 2016/17
Standard rate 20%
Reduced rate 5%
Annual Registration Limit
– from 1.4.16 – 31.3.17
£83,000
Annual Deregistration Limit
– from 1.4.16 – 31.3.17
£81,000

Disclaimer

This publication is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.

For more information

For more information on anything discussed in this article or if you would like some tax planning advice please contact your usual Hawsons contact. Alternatively, please contact your nearest office to arrange your free initial meeting.

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You can see our Budget 2017 summary here.

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