Tax Rates

Income tax allowances and bands

Please note it is taxable income which applies in this assessment, including earnings, pensions in payment, cash interest, fixed interest income, dividends and rent. ISA income is not included. Income tax is generally charged per band of taxable income: the personal allowance at 0%, basic rate at 20%, higher rate tax at 40% and additional rate tax at 45%. The bands are below:

Income bands (2015/16) Income tax rate Dividend tax rate
Personal Allowance £1 - £10,600 0% 10%
Basic rate tax band (1) £10,601 - £42,385 20% 10%
Higher rate tax band (2) £42,386 - £150,000 40% 32.5%
Additional rate tax band Over £150,000
45% 37.5%
Income bands (2016/17) Income tax rate Dividend tax rate (3)
Personal Allowance £1 - £11,000 0% 0%
Basic rate tax band (1) £11,001 - £43,000 20% 7.5%
Higher rate tax band (2) £43,001 - £150,000 40% 32.5%
Additional rate tax band Over £150,000 45% 38.1%

Important notes

(1) For savings income there is a 0% starting rate tax band of £5,000 above the personal allowance. However if your non-savings income is above this limit then the 0% starting rate for savings will not apply.

(2) For all ages, the personal allowance reduces where taxable income is above £100,000 - by £1 for every £2 of income above this limit, so that the personal allowance is lost once taxable income exceeds £121,200 (2015/16), £122,000 (2016/17).

(3) The Dividend Allowance provides that the first £5,000 of dividend income is tax free. Excess over this allowance is taxed as shown.

Transferable tax allowance for married couples/civil partners is £1,060 (Does not apply if one is a higher or additional rate taxpayer).

Income tax - main personal allowances

2016/17
Personal Allowance £11,000
Transferable tax allowance for married couples/civil partners £1,100
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

Income tax - bands

2016/17
Starting rate for savings only £0 - £5,000
Basic rate £0 - £32,000
Higher rate £32,001 - £150,000
Additional rate £150,000+
Higher rate threshold (Standard personal allowance + basic rate band) £43,000

Capital gains tax (CGT)

2016/17 Capital gains tax rates (non-business assets)

Tax rate
Gains which when added to taxable income fall in the basic rate tax band 10%
Gains which when added to taxable income fall in the higher or additional rate tax band 20%

Entrepreneurs' Relief (Business assets)

Tax rate
First £10m of lifetime profit 10%
Long-term investment in unlisted companies, first £10m of lifetime profit* 10%

Inheritance tax (IHT)

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

Stamp duty

Stamp duty reserve tax (SDRT)

Tax rate
Shares 0.5% charge rounded up to the nearest penny

Stamp duty reserve tax (SDRT)

Value Tax rate
Shares Less than £1,000 0%
Greater than £1,000 0.5% charge rounded up to £5

Stamp duty land tax (SDLT) - residential

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%

Discretionary trusts

Tax rate
Income tax rate (above £1,000 per annum) 45%
Capital gains tax allowance £5,550
Capital gains tax rate 20%
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%

State Pension

Basic State Pension rate - for those who reached State Pension age before 6 April 2016

2016/17
Maximum £119.30 per week

New State Pension rate - for those who reached State Pension age on or after 6 April 2016

2016/17
Maximum £155.56 per week

Pensions

Tax relief on pension contributions

Tax status Tax relief 2015/16* Net cost of £1,000 gross contribution 2015/16 Tax relief 2016/17* Net cost of £1,000 gross contribution 2016/17
Non-taxpayer (including children) 20% £800 20% £800
Basic rate taxpayer 20% £800 20% £800
Higher rate taxpayer 40% £600* 40% £600*
Additional rate taxpayer 45% £550* 45% £550*

Pension contribution limits

Relevant UK earnings (usually earnings from employment or self-employment) Maximum personal or employee contribution for tax relief
£0 - £3,600 £3,600
£3,601 and over 100% of earnings

Attendance allowance

2015/16 and 2016/17
Higher rate £82.30
Lower rate £55.10

National Insurance contributions

Class 1 employed (2016/17)

Earnings per week Employee rate
£0 to £155 Nil
£156 to £827 12%
£827 and over 2%
£0 to £156 Nil
£157 and over 13.8%

Self employed and voluntary

Type of National Insurance contribution Tax rate 2016/17
Class 2 self employed £2.80 per week
Class 2 small profits threshold £5,965 per annum
Class 3 voluntary £14.10 per week
Class 4 lower profits limit £8,060 per annum
Class 4 upper profits limit £43,000 per year
Class 4 rate between lower profits limit and upper profits limit 9%
Class 4 rate above upper profits limit 2%