Tax Rates and Allowances

 

Income tax

Income Tax Rates

 

Income Tax

1

2016/17

2015/16

Starting rate limit (savings income)

2

*£5,000

*£5,000

Starting rate

2

*0%

*0%

Basic rate band – income up to

 

£32,000

£31,785

Basic rate

 

20%

20%

Dividend ordinary rate, otherwise taxable at basic rate

 

***7.5%

10% (0%**)

Higher rate – income over

 

£32,000

£31,785

Higher rate

 

40%

40%

Dividend upper rate, otherwise taxable at higher rate

 

***32.5%

32.5% (25%**)

Additional rate – income over

 

£150,000

£150,000

Additional rate

 

45%

45%

Dividend additional rate, otherwise taxable at additional rate

 

***38.1%

37.5% (30.6%**)

 

For 2016/17 Scottish taxpayers are effectively subject to the same income tax rates as the rest of the UK.

* If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate will not be available for savings income

For 2016/17, £1,000 of savings income for basic rate taxpayers (£500 for higher rate) may be tax-free.

** Effective rate with tax credit

*** For 2016/17 the first £5,000 of dividends are tax-free

Personal allowances

The personal allowance, including the minimum age-related allowance, is reduced by £1 for every £2 that net adjusted income exceeds £100,000.

 Personal Allowance (PA)

2016/17

2015/16

 

Born after 5 April 1938

3

£11,000

£10,600

Born before 6 April 1938

4

£11,000

£10,660

Income limit for PA

3

£100,000

£100,000

Income limit for PA (Born before 6 April 1938)

4

£27,700

£27,700

Blind person’s allowance

 

£2,290

£2,290

Married couple’s allowance (MCA)

Either partner born before 6 April 1935 (relief restricted to 10%)

5

£8,355

£8,355

Transferable tax allowance (‘Marriage Allowance’)

For certain married couples (relief 20%)

6

£1,100

£1,060

Tax Shelters

Type

2016/17

2015/16

Venture Capital Trust (VCT) up to

£200,000

£200,000

Enterprise Investment Scheme (EIS) up to

£1,000,000

£1,000,000

Seed Enterprise Investment Scheme up to

£100,000

£100,000

Social Investment Tax Relief

£1,000,000

£1,000,000

Golden Handshake (max).

£30,000

£30,000

Notes

  1. From 2016/17 onwards, all individuals will be entitled to the same personal allowance, regardless of the individual’s date of birth.
  2. If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income.
  3. The personal allowance, including the minimum age-related allowance, is reduced by £1 for every £2 that adjusted net income exceeds £100,000, regardless of the individual’s date of birth.
  4. Personal allowances for those born before 5 April 1938 are reduced by £1 for each £2 of excess income over £27,700 until the basic allowance is reached.
  5. Similar limits apply to the married couple’s allowance. The reduction in allowance is subject to a minimum level of £3,220. (For couples married before 5 December 2005, only the husband’s income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
  6. Available to spouses/civil partners born after 5 April 1935. The allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction at 20% of the transferred amount.

Capital gains tax

Capital gains tax rates and bands for 2016/17

On chargeable gains

Amount

Total taxable gains and income

up to £32,000

10%

from £32,001

20%

Annual exemption

individuals

£11,100

most trustees

£5,550

Chattels exemption

proceeds per item or set

£6,000

Transfers between husband and wife or civil partners living together are generally exempt.

 

Entrepreneurs’ Relief

Qualifying gains will be taxed at 10%.

Claims may be made on more than one occasion up to a “lifetime” total of £10 million.

 

Corporation tax

Financial year to

31 March 2017

31 March 2016

Corporation tax rate

20%

20%

 

 

Capital allowances

Plant and Machinery

%

Investment for use in Enterprise Zones, energy saving and environmentally beneficial equipment, new zero-emission goods vehicles, new low CO2 emission (up to 75g/km) cars, natural gas / hydrogen refuelling equipment: first year allowance (FYA)

100%

Annual investment allowance (AIA) – on the first £200,000 of investment (excludes cars and other expenditure already qualifying for 100% FYA)

*100%

Writing down allowance on expenditure not qualifying for AIA or FYA:

 

Long-life assets, integral features of buildings, cars over 130g/km

8%

Other plant and machinery

18%

Business premises renovation: maximum initial allowance

100%

* Transitional rules may apply

 

 

Inheritance tax

 

2016/17

2015/16

Standard threshold

£325,000

£325,000

Combined threshold maximum for married couples and civil partners

£650,000

£650,000

Rate of tax on balance

Chargeable lifetime transfers

20%

20%

Transfers on, or within 7 years of, death*

*40%

*40%

* A lower rate of 36% applies where 10% or more of a deceased person’s net estate is left to charity.

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. Tax attributable to such transfers is then subject to Taper Relief:

Years before death

0-3

3-4

4-5

5-6

6-7

Tax reduced by

0%

20%

40%

60%

80%

Main Reliefs

Business property

%

business or interest therein

100%

qualifying shareholdings in unquoted* companies

100%

land, buildings, machinery, or plant used by transferor’s controlled company or partnership

50%

Agricultural property

%

Agricultural property relief

50% or 100%

* Unquoted companies include those listed on AIM

Main Exemptions

  1. Most transfers between spouses and civil partners.
  2. The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year.
  3. Gifts of up to but not exceeding £250 p.a. to any number of persons.
  4. Gifts in consideration of marriage or civil partnership of: up to £5,000 by a parent, up to £2,500 by a grandparent or great grandparent, or up to £1,000 by any other person.
  5. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
  6. Gifts to charities, whether made during lifetime or on death.

 

Vehicle benefits

Chargeable on employees earning £8,500 or over (including benefits), and directors.

Car Benefit

The taxable benefit is calculated as a percentage of the list price of the car, on the day before it was registered, plus certain accessories. The percentage depends upon the rate at which the car emits carbon dioxide (CO2), and the fuel type.

From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km and 51-75 g/km. The appropriate percentages for the remaining bands were increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.

You can find the appropriate percentage for 2016/17 using the following table.

CO2 emissions

Appropriate percentage

(g/km)

Petrol %

Diesel %

0 – 50

7

10

51 – 75

11

14

76 – 94

15

18

95 – 99

16

19

100 – 104

17

20

105 – 109

18

21

110 – 114

19

22

115 – 119

20

23

120 – 124

21

24

125 – 129

22

25

130 – 134

23

26

135 – 139

24

27

140 – 144

25

28

145 – 149

26

29

150 – 154

27

30

155 – 159

28

31

160 – 164

29

32

165 – 169

30

33

170 – 174

31

34

175 – 179

32

35

180 – 184

33

36

185 – 189

34

37

190 – 194

35

195 – 199

36

200 and above

37

 

CO2 emission information

For all cars first registered from at least November 2000, the definitive CO2 emissions figure for tax purposes is recorded on the Vehicle Registration Document (V5). Under an agreement with HM Revenue & Customs (HMRC), the Society of Motor Manufacturers and Traders (SMMT) is providing a CO2 emissions enquiry service on their website at www.smmt.co.uk for cars first registered from January 1998.

Cars registered before 1 January 1998

Reliable emissions data is not widely available for cars registered before 1 January 1998.

Taxable percentages regardless of fuel type for cars registered before 1 January 1998

Engine capacity

Taxable %

Up to 1400cc

15%

1401 – 2000cc

22%

Over 2000cc

32%

 

Car fuel benefit

The taxable car fuel benefit, for 2016/17, is calculated by applying the CO2 based car benefit percentage to the car fuel benefit charge multiplier of £22,200.

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.

HMRC advisory mileage rates from 1 December 2016 for employee private mileage reimbursement or employer reimbursement of business mileage in company cars are:

Fuel-only mileage rates for petrol and LPG

Engine Size

Petrol

LPG

1400cc or less

11p

7p

1401cc – 2000cc

14p

9p

Over 2000cc

21p

13p

 

Fuel-only mileage rates for diesel

Engine Size

Diesel

1600cc or less

9p

1601cc – 2000cc

11p

Over 2000cc

13p

 

Example

A company car driver has a car which, on the day before it was first registered, had a list price of £21,000. It runs on petrol, and emits 177g/km of CO2.

If we assume the driver pays tax at 40%, the 2016/17 tax bill on the car is: £21,000 x 32% x 40% = £2,688.

If the employer provides any fuel used for private journeys and is not reimbursed for the cost, the 2016/17 tax bill for the fuel is: £22,200 x 32% x 40% = £2,842.

Company vans

The taxable benefit for the unrestricted use of company vans is £3,170 (with no reduction for older vans) plus a further £598 of taxable benefit if fuel is provided by the employer for private travel.

Van and fuel charge

Tax Type

Van

Fuel

Total

Tax (20% taxpayer)

£634

£119.60

£753.60

Tax (40% taxpayer)

£1,268

£239.20

£1,507.20

Tax (45% taxpayer)

£1,426.50

£269.10

£1,695.60

Employer’s Class 1A NICs

£437.46

£82.52

£519.98

Van drivers can avoid a benefit charge if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use.

The flat rate of £3,170 is reduced by 80% to £634 for vans which cannot produce C02 engine emissions under any circumstances when driven. There will be no fuel benefit for such vans.

 

Mileage allowances

It is quite normal practice for employees to be reimbursed at a reasonable mileage rate for business use of their own vehicles. 

A statutory system of Approved Mileage Allowance Payments (AMAPs) applies for employees using their own vehicles for business journeys, as follows:

Vehicle type

Per mile

Car/van first 10,000 miles in the tax year

45p

– Car/van each additional mile above 10,000

25p

Motorcycles

24p

Bicycles

20p

It is no longer possible to make a claim for tax relief based on the actual receipted bills, nor claim capital allowances or interest on loans related to car purchases.

Unless the employee is reimbursed at a rate higher than the AMAP, the payments do not need to be reported on a P11D. If the employer pays less than these rates, it is possible for the employee to claim income tax relief for the shortfall.

Rates of up to 5p per mile, per passenger, are also tax- and NICs- free when paid for the carriage of fellow employees on the same business trip. This now covers volunteers who drive for hospital car services etc, even though they are not strictly employees.

 

National insurance contributions

Class 1 payable on weekly earnings of

Employee (Primary)

Below £112 (lower earnings limit)

Nil

£112 – £155 (primary threshold)

0%*

£155.01 – £827 (upper earnings limit)

12%**

Above £827

2%**

* No NICs are actually payable but notional Class 1 NIC is deemed to have been paid; this protects certain state benefit entitlements.
** Over state pension age, the employee contribution is generally nil.

 

Employer (Secondary)

Up to £156 (secondary threshold)

Nil

Above £156

13.8%

£156.01 – £827 (upper secondary threshold for under 21s)

0%

£156.01 – £827 (apprentice upper secondary threshold for under 25s)

0%

Employment Allowance

Up to £3,000 per year

Class 1A on relevant benefits

13.8%

Class 1B on PAYE settlement arrangement

13.8%

 

Class 2

 

Rate

Self employed

£2.80 per week

Small profits threshold

£5,965 per annum

 

Class 3

 

Rate

Voluntary

£14.10 per week

 

Class 3A

Class 3A voluntary contributions may be available to 5 April 2017 in order to obtain extra additional State Pension (maximum £25 a week) – variable contribution rates according to age.

Class 4* (Self employed on annual profits)

 

Rate

£8,060 to £43,000

9%

Excess over £43,000

2%

* Exemption applies if state pension age was reached by 6 April 2016.

 

Pension premiums and withdrawals

There is no financial limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual’s UK relevant earnings or £3,600 (gross).

From 6 April 2016 the annual allowance may be reduced by £1 for every £2 of adjusted income over £150,000 to a minimum of £10,000.

All pension input periods open on 8 July 2015 were closed on that date, with the next input period running from 9 July 2015 to 5 April 2016. All subsequent input periods will be concurrent with the tax year from 2016/17 onwards.

For the sake of fairness during this alignment process, savers may be able to receive an additional annual allowance entitlement. They may be able to receive tax relief on up to £80,000 of pension contributions for 2015/16, with a maximum of £40,000 being available for the period 9 July 2015 to 5 April 2016.

In addition, an individual may have unused brought forward amounts.

The maximum age for tax relief is 74. The lifetime allowance charge applies to cumulative benefits exceeding £1m*. Inheritors can access pension funds worth up to £1m tax-free where savers die before reaching 75. Pensions inherited after the saver reaches 75 will be subject to recipient’s marginal rate of tax.

From April 2015 people aged 55 or over can withdraw any sum from their Defined Contribution pension savings. On most withdrawals 25% of the total will be tax-free with the rest subject to income tax at the pensioner’s marginal rate.

*Subject to transitional protection for excess amount.

 

Charitable giving

Gift Aid

  1. Individuals are able to claim higher rate relief on cash gifts and payments to charities under gift aid. Basic rate tax is treated as having been deducted, so you must pay enough tax for the year to cover the tax withheld from your Gift Aid payment.
  2. Special tax reliefs apply to gifts to charities of certain types of shares and securities, or land and buildings.
  3. Individuals have the opportunity to make a claim for charitable donations made in one tax year to be treated as if they had been made in the previous tax year.

Example

A request could be made for Gift Aid payments made between 6 April 2016 and the date that the 2016 return is filed to be treated as if they were made in the year to 5 April 2016. This would mean that a payment could rank for higher rate tax relief for 2015/16, even if the donor is liable at basic rate only in 2016/17. The request would normally be made by completing the relevant box in the 2016 tax return, and the opportunity to carry back donations is lost once that return has been filed (provided this is no later than 31 October 2016 or 31 January 2017, as appropriate). It is not possible to amend the 2016 tax return in order to carry back a donation.

 

Give As You Earn

  1. Employees may authorise participating employers to deduct donations from their gross salary for forwarding to their nominated charities.
  2. Employees receive tax relief in full on their donations.

 

Savings and investments

Individual Savings Accounts

ISAs 2016/17

Overall investment limit

£15,240

Junior ISA limit

£4,080

 

Notes

  1. Investments inISAs are free of income tax and capital gains tax.
  2. Those aged 16-17 can invest in a cash ISA, in addition to a junior ISA.
  3. ISAsallow you to take your money out at any time without losing tax relief and furthermore you are not required to declare income and capital gains from ISAs 
  4. Transitional rules may apply.

 

Stamp taxes

On the transfer of property in England, Wales and Northern Ireland, the SDLT is:

 

Residential Property

Consideration

Sole

Additional

Value up to £40,000

0%

0%

Over £40,000 – £125,000

0%

3%

Over £125,000 – £250,000

2%

5%

Over £250,000 – £925,000

5%

8%

Over £925,000 – £1,500,000

10%

13%

Over £1,500,000

12%

15%

Residential SDLT calculated on the consideration falling within each band. Additional SDLT of 3% may apply to the purchase of additional residential properties from 1 April 2016.

 

Non-residential Property

Consideration

Rate

Value up to £150,000

0%

Over £150,000 – £250,000

2%

Over £250,000 – £500,000

5%

From 17 March 2016 the calculation of SDLT on purchase of non-residential property was changed from the whole transaction value to the same basis as residential (consideration falling within each band).

SDLT rates for leasehold rent transactions have also changed, with a new 2% rate on leases with a net present value (NPV) over £5 million.

 

Land and Buildings Transaction Tax

On the transfer of property in Scotland, the Land and Buildings Transaction Tax is:

Residential

Consideration (£)

Rate (%)

0 – 145,000

Nil

145,001 – 250,000

2

250,001 – 325,000

5

325,001 – 750,000

10

Over 750,000

12

 

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. Additional LBTT of 3% may apply to the purchase of additional residential properties from 1 April 2016.

 

Value added tax

Value Added Tax from 1 April 2016

Standard Rate

20%

VAT

 fraction

1/6

Reduced Rate

5%

Taxable Turnover Limits

Registration – last 12 months or next 30 days over

£83,000 from 1 April 2016

Deregistration – next 12 months under

£81,000 from 1 April 2016

Cash accounting scheme – up to

£1,350,000

Optional flat rate scheme – up to

£150,000

Annual accounting scheme – up to

£1,350,000

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use a flat rate valuation.

The table shows the VAT chargeable for quarters commencing on or after 1 May 2015. These rates were current at the date of publication. Please check with us for any updated rates from 1 May 2016.

CO2 emissions

Quarterly VAT

(g/km)

Flat rate valuation £

VAT on charge £

0 – 124

133

22.17

125 – 129

200

33.33

130 – 134

213

35.50

135 – 139

227

37.83

140 – 144

240

40.00

145 – 149

254

42.33

150 – 154

267

44.50

155 – 159

281

46.83

160 – 164

294

49.00

165 – 169

308

51.33

170 – 174

320

53.33

175 – 179

334

55.67

180 – 184

347

57.83

185 – 189

361

60.17

190 – 194

374

62.33

195 – 199

388

64.67

200 – 204

401

66.83

205 – 209

415

69.17

210 – 214

428

71.33

215 – 219

441

73.50

220 – 224

455

75.83

225 or more

468

78.00

 

Some useful rates

Weekly Benefit

2016/17

2015/16

Basic Retirement Pension

Single person

£119.30

£115.95

Couple

£190.80

£185.45

Pension Credit standard minimum guarantee

Single person

£155.60

£151.20

Couple

£237.55

£230.85

New State Pension

Single person

£155.65

N/a

Child Benefit

First eligible child

£20.70

£20.70

Each subsequent child

£13.70

£13.70

Statutory Sick Pay (SSP)

Average weekly earnings £112 or over (2015/16 £112)

£88.45

£88.45

Statutory Maternity Pay (SMP)

90% of average weekly pay

First 6 weeks

 

Lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings

Next 33 weeks

 

Minimum rate

£100.80

£100.80

Statutory Adoption Pay (SAP)

Minimum rate**

£100.80

£100.80

Statutory Paternity Pay (SPP)****

Minimum rate***

£100.80

£100.80

Jobseeker’s Allowance

Single person (25 or over)

£73.10

£73.10

Couple (both 18 or over)

£114.85

£114.85

* 90% of average weekly pay for first 6 weeks, lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings for next 33 weeks

** Lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings for 39 weeks

*** Lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings for 2 weeks

**** Additional statutory paternity pay (ASPP) has been replaced by Shared Parental Leave.

 

National Living Wage

From 1 April 2016:

Age

Rate

25 and over

£7.20

 

National Minimum Wage

Age

From 1 Oct 2016

From 1 Oct 2015

21 – 24

£6.95

£6.70

18 – 20

£5.55

£5.30

16 and 17

£4.00

£3.87

Apprentices*

£3.40

£3.30

* Rate applies to apprentices under 19, or those 19 and over in the first year of apprenticeship.

Universal Credit (monthly rates)

2016/17

2015/16

Single person (25 or over)

£317.82

£317.82

Couple (where one or both 25 or over)

£498.89

£498.89

 

Key dates and deadlines

Payment Dates

Income Tax and National Insurance Contributions

31 July 2016           2015/16 second payment on account

31 January 2017    2015/16 balancing payment, and 2016/17 first payment on account

31 July 2017           2016/17 second payment on account

31 January 2018    2016/17 balancing payment, and 2017/18 first payment on account

 

Class 1A NICs

19 July 2016           2015/16 payment due

 

Capital Gains Tax

31 January 2017    2015/16 Capital Gains Tax

31 January 2018    2015/16 Capital Gains Tax

 

Capital Gains Tax

Commencing            9 months and one day after the end of the accounting period (or by quarterly instalments if large company)

Inheritance Tax

Commencing            6 months after the end of the month of death.

ndFor chargeable lifetime transfers, due date is six months after the end of the month in which the transfer was made.

 

Latest Filing/Issuing Deadlines – 2015/16 PAYE Returns

31 May 2016           Issue P60s to employees.

6 July 2016            P11D and P11Db – also issue copies to employees.

                              Form 42 (reporting of employment-related securities).

 

2016 Self Assessment Tax Return (SATR)

               31 October 2016    Last filing date – paper returns (SATR Paper Version).

30 December 2016 SATR Online If outstanding tax subject to cap to be included in 2017/18 PAYE code.

          31 January 2017    Last filing date – online returns (SATR Online).