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Income Tax Rates & Allowances
Personal Allowance - The standard Personal Allowance is £11,500, which is the amount of income you don’t have to pay tax on.
|Personal Allowance* - up to 10% of the PA can be transferred to a spouse or civil partner who is a basic rate taxpayer||£11,500|
|Blind Person's Allowance||£ 2,320|
|Dividend Tax Allowance - taxes the first £5,000 at nil||£ 5,000|
|Personal Savings Allowance - Basic rate taxpayer||£ 1,000|
|Personal Savings Allowance - Higher rate taxpayer||£ 500|
You don’t get a Personal Allowance on taxable income over £123,000.
Income Tax Rates - applied to the amount of income after deduction of personal allowances.
|Income after allowances 2017/18|
|Band of taxable income||Rate||Dividend rate|
|Starting rate for savings
||up to £5,000||0%|
|Basic rate||up to £33,500||20%||7.5%|
|Higher rate||£33,501 - £150,000||40%||32.5%|
|Additional rate||Over £150,001||45%||38.1%|
Married Couple's Allowance - https://www.gov.uk/married-couples-allowance
People born before 6 April 1948 - https://www.gov.uk/income-tax-rates/born-before-6-april-1948
Blind Person's Allowance - https://www.gov.uk/blind-persons-allowance
Capital Gains Tax
Capital Gains Tax (CGT) - is a tax on the profit when you sell (or dispose of) something that has increased in value. You pay CGT on the gain when you dispose of most personal possessions worth £6,000 or more, apart from your car, property that isn’t your main home, your main home if you’ve let it out, used it for business or it’s very large, shares that aren’t in a NISA, ISA or PEP & business assets (but see Entrepreneurs’ relief below).
You don’t usually pay tax on gifts to your husband, wife, civil partner or a charity. You don’t pay capital gains tax on certain assets, including any gains you make from: NISAs, ISAs or PEPs, UK government gilts and Premium Bonds, betting, lottery or pools winnings.
Capital Gains Tax allowances - You only have to pay capital gains tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount). Capital gains tax rates of 10% and 20% introduced for disposals on or after 6 April 2016 do not apply to transactions involving residential property. Capital gains tax rates for these transactions remain at 18% and 28%. An income tax trade loss may be offset against capital gains.
|Tax year||Annual Exempt Amount|
|6 April 2017 to 5 April 2018||£11,300|
|6 April 2016 to 5 April 2017||£11,100|
Entrepreneurs’ relief (ER) - may be available on certain business disposals and has the effect of charging the first £10m (from 6 April 2011) of gains qualifying for the relief at an effective rate of 10%. The relief applies to gains arising on a disposal of:
Other reliefs available are Business asset roll-over relief and Business asset gift relief.
In simple terms, a pension scheme is just a type of savings plan with favourable tax treatment.
Pensions set by your employer - also known occupational pensions broadly fall under two main categories, these are: defined benefit pension schemes & defined contribution pension schemes.
Pensions set up by yourself - contract based schemes are provided by insurance companies and other pension providers. They’re effectively a contract between you and the pension provider and include Personal pensions, SIPPs, Stakeholder pensions & Retirement annuities.
How much can I pay into a pension? - If you’re a UK taxpayer, in the tax year 2017-18 the standard rule is that you’ll get tax relief on pension contributions of up to 100% of your earnings or a £40,000 annual allowance, whichever is lower.
Any contributions you make over this limit will be subject to Income Tax at the highest rate you pay. However, you can carry forward unused allowances from the previous three years, as long as you were a member of a pension scheme during those years. But there is an exception to this standard rule. If you have a defined contribution pension, the annual allowance reduces to £10,000 in some situations. From April 2016 the £40,000 annual allowance will be reduced if you have an income of over £150,000. The limit may be reduced to £4,000 once money purchase pensions are accessed.
If you are not earning enough to pay Income Tax, you can still receive tax relief on pension contributions up to a maximum of £3,600 a year or 100% of earnings, whichever is greater, subject to your annual allowance. For example if you have relevant income below £3,600, the maximum you can pay in is £2,880 and the government will top up your contribution to make it £3,600.
Automatic enrolment - since October 2012, a system is being gradually phased in requiring employers to automatically enrol all eligible workers into a workplace pension. It requires a minimum total contribution, made up of the employers contribution, the worker's contribution and the tax relief. Those eligible should be enrolled into their workplace schemes by October 2018.
Accessing your pension - In Budget 2014, George Osborne announced 'pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. Big changes came into effect on 6 April 2015 for those with money purchase pensions.
Inheritance tax (IHT) is paid if a person’s estate is worth more than £325,000 when they die.
An estate is exempt from IHT if the deceased left everything to their husband, wife or civil partner. Married couples and civil partners can give any value of gifts to each other during their lifetime without IHT being due on them. If someone’s estate is less than the IHT threshold of £325,000, the remaining threshold can be transferred to their husband, wife or civil partner’s estate when they die. This means the surviving partner’s estate can be worth up to £650,000 before any IHT is due. IHT may also be payable on gifts made in an individual's lifetime but within 7 years of death. Transfers of assets into trust made in an individual's lifetime may be subject to an immediate charge at lifetime rates.
Inheritance tax rule changes - In the 2015 Summer Budget, the Chancellor, George Osborne announced a new transferable main residence allowance, which will gradually increase from £100,000 in April 2017 to £175,000 per person by 2020/21. This is in addition to the main nil-rate band. It will effectively raise the IHT-free allowance to £500,000 per person. Where married couples jointly own a family home and want to leave this to their children or grandchildren, the total IHT exemption will be £1m.
|Standard nil rate band £325,000|
|Annual Exemption £3,000|
|Small Gifts £250|
|Normal expenditure out of income|
|Rates of Inheritance tax
|Death rate if >10% charitable legacies made||36|
|IHT may also be payable on gifts made in an individual's
lifetime but within seven years of death.
|Years before death||Tax you pay|
|There’s no IHT on a wedding gift worth up to:|
|Gift from||Amount (£)|
Business Relief - allows a business to be passed on by reducing the IHT on it by up to 100%.
Agricultural Relief - allows a working farm to be passed on without paying IHT on it.
National Insurance contributions (NICs) qualify you for certain benefits including the State Pension.
|Class 1||Employees earning more than £157 a week and under State Pension age - they’re automatically deducted by your employer|
|Class1A||Employers pay these directly on their employee’s expenses or benefits|
|Class 2||Self-employed - £2.85 a week. You don’t have to pay if you earn less than £6,025 a year|
|Class 3||Voluntary contributions - to fill or avoid gaps in your NI record|
|Class 4||Self-employed pay 9% on profits between £8,164 and £45,000, 2% on profits above £43,000|
The amount of NI you pay depends on your employment status and how much you earn.
If you’re employed - you pay Class 1 NICs. The rates for most people for the 2017/18 tax year are:
|Your pay||Class 1 National Insurance rate|
|£157 to £866 a week||12%|
|Over £866 a week||2%|
Employers pay a different rate of NI depending on their employees’ category letters. There is a nil rate of employer NICs for employees under the age of 21 and apprentices under 25.
Employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £3,000 - sole director companies do not qualify.
If you’re self-employed - you pay Class 2 and Class 4 NI, depending on your profits, through self assessment.
What’s new with Class 2? - You might have noticed that in mid-2015 HlMRC stopped collecting/demanding payment of Class 2 (self-employed) NI contributions. This was not an act of generosity by the government but a change in the way Class 2 NI is collected. In April 2016 the rules changed to allow Class 2 NI to be added to your self-assessment tax bill for 2015/16 (and later years). When you submit your tax return HMRC will calculate any tax and Class 2 payable on 31 January 2017. Class 2 NIC is abolished from April 2018.
Employed and self-employed - if you were employed, say as a director, and received a salary of more than £42,285 in 2015/16, you will have paid the maximum NI for that year. Therefore, if you also had self-employed income you aren’t liable to pay any Class 2. In previous years, to avoid having to pay it you had to complete a special form, known as an NI deferment application, and send it to HMRC. The good news is that an application is not required for 2015/16 and later years. HMRC will automatically check if you’ve paid the maximum NI.
In certain circumstances an employer may be required to make payments to an employee who is not at work. The most common reasons are sickness and maternity.
Statutory Sick Pay (SSP) - Your employees may be eligible for SSP, which is £89.35 a week (2017/18) for up to 28 weeks. You can offer more if you have a company sick pay scheme (you can’t offer less). SSP is paid when the employee is sick for 4 days in a row (including non-working days). You start paying SSP from the fourth day (if they normally work that day).
Maternity pay and leave - When you take time off to have a baby you might be eligible for Statutory Maternity Leave which is 52 weeks and made up of:
You don’t have to take 52 weeks but you must take 2 weeks’ leave after your baby is born.
Statutory Maternity Pay (SMP) is paid for up to 39 weeks. You get:
SMP is paid in the same way as your wages (eg monthly or weekly). Tax and NI will be deducted.
|Type||Max period||2017/18 to qualify must earn at least £113/wk|
|Statutory Sick Pay||28 weeks||£89.35|
|Statutory Maternity Pay||First six weeks||90% of weekly earnings|
|Next 33 weeks||£140.98 or 90% of weekly earnings if lower|
|Statutory Paternity Pay||1 or 2 weeks||£140.98 or 90% of weekly earnings if lower|
|Statutory Adoption Pay||First six weeks||90% of weekly earnings|
|Next 33 weeks||£140.98 or 90% of weekly earnings if lower|
|Shared Parental Pay||37 weeks||£140.98 or 90% of weekly earnings if lower|
You’ll usually get Child Benefit for children you’re responsible for, even if you’re not their parent. Only one person can get Child Benefit for each child. There are 2 Child Benefit rates.
|Allowance||Weekly rate 2017/18|
|Eldest or only child||£20.70|
|Additional children||£13.70 (per child)|
Child Benefit stops 31 August on or after your child’s 16th birthday if they leave education or training. It continues if they stay in education or training, but you must tell the Child Benefit Office.
High Income Child Benefit Tax Charge - You may have to pay a tax charge if you have income over £50,000 and you or your partner get Child Benefit. If you’re affected by the tax charge you can choose not to get Child Benefit payments. You can carry on getting Child Benefit and pay any tax charge at the end of each tax year. Register for Self Assessment (if you don’t already fill in a tax return) - so you can send a tax return. Complete the tax return and declare the amount of Child Benefit received for the tax year and pay the tax charge.
What counts as income - To work out if your income is over the threshold, you’ll need to work out your ‘adjusted net income’. Your adjusted net income is your total taxable income before any personal allowances and less certain tax reliefs, such as trading losses, donations to charity made through gift aid and pension contributions.
Car Benefit - The car benefit is calculated at a percentage given by a table and on list price. http://carfueldata.dft.gov.uk/search-company-car-tax.aspx
Car Fuel Benefit - Where an employee has the benefit of private fuel for a company car the percentage used to calculate the car benefit is applied to the 'fuel charge multiplier' to work out the assessable benefit. Fuel charge multiplier for 2017/18 is £22,600 (16/17 £22,200)
Van Benefit - There will be a tax charge for an employee who is provided with a company van that is made available for private use. There is an additional tax charge where fuel is provided for private use. Benefit for 17/18 is £3,230 (16/17 £3,170) Fuel benefit £610 for 17/18 (16/17 £598)
Mileage Allowance Payments - are what an employee can receive from their employer for using their own vehicle for business.
|Vehicle type||Pence per mile|
|Cars and vans||to 10,000 miles||45p|
Advisory Fuel Rates - apply where employers reimburse employees for business travel in a company car or where employees repay the cost of fuel used for private travel. (from 1.3.16)
|Engine size cc
||Petrol/per mile||LPG/per mile|
|Engine size cc
|1600 or less||9p|
VAT Fuel Scale Charges - to work out how much VAT to pay back where there is private use.
The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%). Some things are exempt from VAT, eg. postage stamps, financial and property transactions. The VAT rate businesses charge depends on their goods and services. Check the rates of VAT on different goods and services.
|Rate:||% of VAT|
|Taxable Turnover Limits:|
|Registration - last 12 months or next 30 days over||£85,000 from 1 April 2017|
|Deregistration - next 12 months under||£83,000 from 1 April 2017|
|Cash accounting scheme - up to||£1,350,000|
|Optional flat rate scheme - up to||£150,000|
|Annual accounting scheme - up to||£1,350,000|
We offer a comprehensive VAT service including assessing the benefits and disadvantages to your business of being VAT registered, deciding on the most appropriate scheme, attending to VAT registration, VAT returns preparation & dealing with more complex VAT
An ISA is a tax-free wrapper in which you can hold either cash or stocks and shares. Returns are tax-free, so the taxman can't take a share. Cash ISAs are basically the same as other savings accounts, other than the fact you don't pay income tax on your returns. Stocks and shares ISAs are much riskier, as the value of your investments can go down as well as up.
The Government sets a limit on how much you can invest and save in ISAs each tax year (from 06 April one year to 05 April the next). This is known as your ISA allowance. It usually increases each year, but you don't have to use it all if you don't want to. You can also split your ISA allowance between a Stocks & Shares ISA and a Cash ISA each year if you like.
Your ISA allowance for the 2017/18 tax year is £20,000 and the full amount can be invested in a Stocks & Shares ISA, a Cash ISA or an Innovative Finance ISA (or any combination of the three).
|Using your 2017/18 ISA allowance||Stocks & Shares ISA||Cash ISA||Innovative Finance ISA||Total 2017/18 ISA allowance|
|Invest in a Stocks & Shares ISA only||£20,000||£0||£0||£20,000|
|Invest in a Stocks & Shares ISA and save in a Cash ISA and/or an Innovative Finance ISA||Split your allowance however you choose, as long as the combined total doesn't exceed £20,000||£20,000|
|Invest in a Cash ISA only||£0||£20,000||£0||£20,000|
|Invest in an Innovative Finance ISA only||£0||£0||£20,000||£20,000|
Here are a few tips on how to get the maximum benefit from your ISA allowance:
Corporation tax is charged on the profits of companies and of unincorporated bodies that are not partnerships, for example members' clubs. The term “profits” includes all sources of income and capital gains.
The rate of corporation tax is fixed by reference to financial years. The financial year commences on 1 April and thus the financial year 2017 is the year commencing on 1 April 2017, and so on.
A host of new tax changes affecting businesses and individuals came into effect on 1 April 2015 such that from 1 April 2015 there is a single Corporation Tax rate of 20% for profits.
In the Summer Budget 2015, the government announced legislation setting the Corporation Tax main rate at 19% for the years starting the 1 April 2017, 2018 and 2019 and at 18% for the year starting 1 April 2020. In the Budget 2016, the government announced a further reduction to the Corporation Tax main rate for the year starting 1 April 2020, setting the rate at 17%.
Previous rates - The rate of tax on profits before 1 April 2015 depends on the size of the profits:
|Profits||Rate||From 1.4.15||From 1.4.14||From 1.4.13|
|£300,000 or less||Small profits rate||20%||20%||20%|
|Above £300,000||Main rate||20%||21%||23%|
Marginal Relief is available on profits between £300,000 and £1.5 million made before 1 April 2015.
Capital allowances - enable businesses to write off the cost of assets against taxable income.
Annual Investment Allowance (AIA) - The first £200,000 of annual investment in plant and machinery is allowed at 100%.
Writing down allowance (WDA) - If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for. The 3 types of pool are the main pool with a rate of 18%, the special rate pool with a rate of 8% and single asset pools with a rate of 18% or 8% depending on the item. Add items you’ve claimed annual investment allowance (AIA) or first year allowances on to the pool they qualify for. The value you add for them is zero. For first year allowances you don’t pool them until the year after you claim for them.
Enhanced Capital Allowances (ECA) - You can claim ‘enhanced capital allowances’ (a type of first year allowances) for energy and water efficient equipment including some cars with low CO2 emissions, energy saving equipment that’s on the energy technology product list, eg certain motors and new zero-emission goods vehicles.
Electric Vans - 100% capital allowance for new vans which don't produce CO2 emissions.
Short-life assets - Capital allowances on these can be calculated in separate single asset pools.
Rates for cars - Cars are not eligible for the AIA, so usually only benefit from WDA (vehicles which are not classed as cars are eligible for the AIA). The rate you can claim depends on the CO2 emissions of your car and the date you bought it. The main and special rates apply from 1 April for limited companies, and 6 April for sole traders and partners. The first year allowances rate applies from 1 April for all businesses. (Any cars used by the self employed where there is part non-business use will be separately allocated to a single asset pool with the annual allowance either 18% or 8% depending on the CO2 emissions. The available allowance will be restricted for the private use element)
Cars bought from 1 April 2015 - 31 March 2018:
|Periods from||Annual limit|
|1/6 April 2014||£500,000|
|1 January 2016||£200,000|
|Description of car||What you can claim|
|New and unused, CO2 emissions are 75g/km or less (or car is electric)||First year allowances - you can deduct the full cost from your profits before tax. You can claim first year allowances in addition to annual investment allowance - they don’t count towards your AIA limit.|
|New and unused, CO2 emissions are between 75g/km and 130g/km||Main rate allowances - 18%|
|Second hand, CO2 emissions are 130g/km or less (or car is electric)||Main rate allowances - 18%|
|New or second hand, CO2 emissions are above 130g/km||Special rate allowances - You have to claim a lower rate of 8% on cars with CO2 emissions of more than 130g/km|
Stamp Duty & Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is payable on land and property transactions in England, Wales and Northern Ireland. From 1 April 2015 property transactions in Scotland are subject to Land and Buildings Transaction Tax.
|Residential property||SDLT rate|
|Up to £125,000||Zero|
|The next £125,000 (the portion from £125,001 to £250,000)||2%|
|The next £675,000 (the portion from £250,001 to £925,000)||5%|
|The next £575,000 (the portion from £925,001 to £1.5 million)||10%|
|The remaining amount (the portion above £1.5 million)||12%|
Higher rates for additional properties - From 1 April 2016, you’ll usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you’ll own more than one.
|Non-residential property from 17 March 2016 - on consideration falling in each band||SDLT rate|
|Up to £150,000||Zero|
|£150,001 to £250,000||2%|
Tax when you buy shares - If you buy:
The rate in either case is 0.5% of the consideration.
You don’t have to pay tax if you:
Investing in a small business
Enterprise Investment Scheme (EIS)
The Enterprise Investment Scheme is designed to help smaller, higher-risk companies raise finance and investors can obtain generous income tax and capital gains tax breaks for their investment. The table below sets out the income and capital gains tax reliefs.
Venture capital trusts (VCTs)
Venture Capital Trusts are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. can receive income tax relief of 30 per cent of the amount invested, up to £200,000. Dividends paid out of VCTs are tax-free and capital gains are also tax-free.
Seed Enterprise Investment Scheme (SEIS)
A junior version of EIS known as Seed Enterprise Investment Scheme (SEIS) has been introduced - please see table below for differences.
|Annual investment limit||£200,000||£1 million
|Income tax relief for subscribers||30%||30%||50%|
|Clawback if held for less than||5 years||3 years||3 years|
|Tax free dividends?||Yes||No||No|
|Tax free capital gains?||Yes||Yes - after 3 years||Yes - after 3 years|
|Tax relief for losses?||No||Yes - after 3 years||Yes - after 3 years|
|IHT business property relief?||No||Yes||Yes|
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