Income tax

 

Tax bands and rates 2017/18 2016/17
Basic rate band £33,500 £32,000
Basic rate band - Scotland £31,500 £32,000
Basic tax rate 20% 20%
Dividend ordinary tax rate 7.5% 7.5%
Savings starting rate band £5,000* £5,000*
Savings starting rate - savings income 0% 0%
Higher rate band £33,501 - £150,000 £32,001 - £150,000
Higher rate band - Scotland £31,501 - £150,000 £32,001 - £150,000
Higher tax rate 40% 40%
Dividend upper tax rate 32.5% 32.5%
Additional rate band over £150,000 £150,000
Additional tax rate 45% 45%
Dividend additional tax rate 38.1% 38.1%
Personnal allowance £11,500 £11,000
Trading allowance** £1,000 £0
Property allowance** £1,000 £0
Marriage allowance Transferable allowance £1,150 £1,100
Blind person's allowance £2,320 £2,290
Married couple's allowance (MCA) Maximum amount £8,445 £8,355
Tax reduction at 10% £844.50 £835.50
Applies after UK residence in 7 or
more of the previous 9 tax years
£30,000 £30,000
Applies after UK residence in at least 12 of the previous 14 years £60,000  £60,000 
Applies after UK residence in at least 17 of the last 20 years n/a £90,000 

Enterprise investment scheme (EIS) up to

£1,000,000 £1,000,000
Maximum amount for EIS carry back £50,000 £50,000
Income tax relief rate 30% 30%
Seed enterprise investment scheme (SEIS) £100,000 £100,000
Income tax relief  50%  50%
Venture capital trust (VCT) £200,000 £200,000
Social investment relief £1,000,000 £1,000,000
Income tax relief 30% 30%
VCT tax relief rate 30% 30%
Golden handshake maximum tax free £30,000 £30,000
Rent a room - exempt on gross annual rent up to £7,500 £7,500
Construction industry scheme - deduction rate    
Standard rate - registered 20% 20%
Higher rate - not registered 30% 30%

*Savings income falling into the first £5,000 may be taxed at 0% for certain low income earners.

**When the gross income is £1,000 or less.

2018 and beyond

An increase to the annual amount an individual can invest under the enterprise investment scheme (EIS) in knowledge-intensive companies will take effect from 6 April 2018. 

Provided that anything above £1m is invested in knowledge-intensive companies, an individual can invest up to £2m in total. 

A knowledge-intensive company is regarded as a smaller innovative company carrying out research and development and other activities to develop intellectual property for its own trading purposes.

It is intended to increase the personal allowance to £12,500 and the higher rate threshold to £50,000, but no timetable for these increases has been announced. Once these limits have been attained they will, in future, be index linked by reference to the CPI (Consumer Prices Index).

Termination payments over £30,000 which are subject to income tax after April 2018 will also be subject to employers national insurance contributions.

Income tax will only be applied on the equivalent of an employee’s basic pay if the employee has not worked the notice period.

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