Personal Taxation

Main personal allowances

 2017/182016/17
Personal income tax allowance (PA) £11,500 £11,000
Marriage allowance (transferable) 1,150 1,100
Blind person's allowance 2,320 2,290
Rent-a-room relief 7,500 7,500
Trading Income 1,000 N/A
Property Income 1,000 N/A

Notes

  1. PA is reduced by £1 for every £2 by which Adjusted Net Income (ANI) exceeds £100,000, so PA is nil when ANI is £123,000.
  2. ANI is total taxable income less qualifying pension contributions and Gift Aid donations.
  3. Marriage allowance is the transferable part of the PA and is available only to married couples and civil partners born after 5 April 1935. It can be transferred to their spouse or civil partner as long as the recipient is not taxed at more than 20%.
  4. The Rent-a-room exemption is available where the taxpayer lets out part of the home they live in as furnished residential accommodation.
  5. Where trading income exceeds £1,000, that limit (rather than expenses) may be deducted from gross income.
  6. Where property income exceeds £1,000, that limit (rather than expenses) may be deducted from gross property rents.

Income tax bands

 2017/182016/17
Savings rate band £5,000 £5,000
Basic rate band (BRB) 33,500 32,000
Higher rate band (HRB) 33,501-150,000 32,001-150,000
Additional rate over 150,000 over 150,000
Scottish taxpayers
– BRB 31,500 32,000
– HRB 31,501-150,000 32,001-150,000
Personal Savings Allowance (PSA)
– Basic rate taxpayer 1,000 1,000
– Higher rate taxpayer 500 500
Dividend Nil Rate Band (DNRB) 5,000 5,000

Notes

  1. Savings band only applies to savings income. If taxable general income ('non-savings income') exceeds this band, the savings rate (see below) does not apply.
  2. The BRB and additonal rate threshold are extended by the grossed-up equivalent of personal pension contributions and Gift Aid donations paid by the taxpayer in the tax year, or treated as paid in the tax year.
  3. Taxable income usually uses up the rate bands in the following order:

Income tax rates

  • G 'general income' (employment, pensions, business profits, rent)
  • S 'savings income' (mainly interest)
  • D 'dividends' (distributions from companies/most unit trusts)
 2017/18 & 2016/17
Rates differ for: G S D
Basic rate 20% 20% 7.5%
Higher rate 40% 40% 32.5%
Additional rate 45% 45% 38.1%

Note

  1. The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%. It is not available to a top rate taxpayer.
  2. Dividends are usually taxed as the ‘top slice’ of income. The DNRB taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply.

Remittance basis charge

Resident in the UK for2017/182016/17
7 of the preceding 9 tax years £30,000 £30,000
12 of the preceding 14 tax years 60,000 60,000
17 of the preceding 20 tax years N/A 90,000

Note

  1. The remittance basis charge (RBC) is payable by non-UK domiciled individuals who claim the remittance basis and who have been resident in the UK for the periods shown.
  2. From 2017/18, individuals who have been resident in the UK for 15 of the previous 20 years are deemed to be UK domiciled for Income Tax, Capital Gains Tax and Inheritance Tax, so the remittance basis is not available to them.

High Income Child Benefit charge (HICBC)

 2017/182016/17
Lower threshold £50,000 £50,000
Upper threshold 60,000 60,000

Notes

  1. Only applicable to families who receive child benefit, where adjusted net income of highest earner is above lower threshold.
  2. HICBC is equivalent to 1% of child benefit received by the family, for every £100 of adjusted net income over lower threshold.
  3. Highest earner in family must declare child benefit received by them or their partner on their tax return.
  4. The recipient of child benefit can elect not to receive it in order to avoid the HICBC, without losing their right to accrue certain state benefits. Child benefit payments can subsequently be recommenced if the claimant chooses.
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