Tax rates and allowances

Income Tax rates and allowances

Income tax

Personal allowances and reliefs

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2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10
Personal allowance £ £ £ £ £ £ £ £
Aged under 65* 11,000 10,600 10,000 9,440 8,105 7,475 6,475 6,475
Born between 6 April 1938 and 5 April 1948 11,000 10,600 10,500 10,500
Aged 65–74 10,500 9,940 9,490 9,490
Aged 75 & over 10,660 10,090 9,640 9,640
Born before 6 April 1938 11,000 10,660 10,660 10,660
Blind person’s allowance 2,290 2,290 2,230 2,160 2,100 1,980 1,890 1,890
Transferable personal allowance (to spouse)** 1,100 1,060
Married couples allowance (MCA)
Born before 6 April 1935Max

Min

8,3553,220 8,3553,220 8,1653,140 7,915 7.705 7,295 6,965 6,965
Age allowance limitMCA reduced by £1 for every £2 exceeding limit 27,700 27,700 27,000 26,100 25,400 24’000 22,900 22,900
Rent a room relief 7,500 4,250 4,250 4,250 4,250 4,250 4,250 4,250

*Personal allowance restriction from 2010/11 on

The personal allowance is restricted by £1 for every £2 of an individual’s adjusted net income above £100,000.

** Transferable allowance: a spouse or civil partner who is not liable to income tax above the basic rate may transfer £1,100 (2015/16 £1,060) of their unused personal allowance to their spouse/civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. Taxpayers have 4 years in which to make the election.

Income tax rates

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Rate % 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12 2010/11 2009/10 2008/09
Basic* 20% £0 -£32,000 £0 – £31,785 £0 to £31,865 £0 to £32,010 £0 to £34,370 £0 to £35,000 £0 to £37,400 £0 to £37,400 £0 to 34,600
Higher 40% £32,001 to £150,000 £31,786 to £150,000 £31,866 to £150,000 £32,011 to £150,000 £34,370 to £150,000 £35,001 to £150,000 £37,401 to £150,000 37,401 and above 34,601 and above
Top 45% £150,001 + £150,001 + £150,001 + £150,001 + n/a n/a
Top 50% £150,000 + £150,000 + £150,000 + n/a n/a

*Starting rate band 

a starting rate applies to savings income up to:

  • £5,000 2016/17 – rate 0%
  • £5,000 2015/16   ” “
  • £2,880 2014/15 – rate 10%
  • £2,790 2013/14   ” “
  • £2,710 2012/13   ” “
  • £2,560 2011/12   ” “
  • £2,440 2010/11   ” “
  • £2,320 2008/09 to 2009/10  ” “

This band is not available if taxable non-savings income also exceeds this band.

Note the restriction on personal allowances when income is in excess of £100,000 from 2010/11 on.

Personal Savings Allowance

  • From 2016/17 basic rate taxpayers will not have to pay tax on the first £1,000 of their savings income.
  • From 2016/17 higher rate taxpayers will not have to pay tax on the first £500 of their savings income.
  • There is no personal savings allowance for upper rate taxpayers.

From April 2016 banks and building societies will no longer deduct basic rate tax from interest.

Child benefit claimants

Commencing on 7 January 2013 the High Income Child Benefit Tax Charge provisions will claw back Child Benefit payments when a claimant or their partner’s income exceeds £50,000.

Dividend tax from 2016/17

  • The dividend tax credit is abolished
  • The first £5,000 of dividend received is tax free
  • Basic rate dividends taxed at 7.5%
  • Higher rate dividends taxed at 32.5%
  • Upper rate dividends taxed at 38.1%

Tax rate & effective tax rate on dividends up to 2015/16

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Rate 2013/14 to 2015/16 2012/13 2011/12 2010/11 2009/10 2008/09
Top tax rate 45% 50% 50% 50% 40% 40%
Dividend rate 37.5% 42.50% 42.50% 42.5% 32.5% 32.5%
Effective rate* 30.55% 36.11% 36.11% 36.11% 25% 25%
Higher tax rate 40% 40% 40% 40%
Dividend rate 32.5% 32.5% 32.5% 32.5%
Effective rate* 25% 25% 25% 25%

* For example: if an individual who is a top rate tax payer receives a dividend of £20,000 in 2013/14 (dividends are paid net of 10% tax), he will face a tax liability of £6,111 on the net dividend.

Special rates for trustees income

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Rate 2016/17 2013/14 to 2015/16 2012/13
Standard rate on first £1,000 of income whichwould otherwise be taxed at the special rate for trustees Up to 20% depending on type of income
Trust rate 45% 45% 50%
Dividend trust rate 38.1% 37.5% 42.5%

Pensions – higher rate restrictions

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Contribution limits From 2016/17 2014/15 to 2015/16 2011/12 to 2013/14 To 2010/11
Annual allowance £40,000 £40,000 £50,000 £215,000
Tapered Annual Allowance with income over £150,000 n/a n/a n/a
Minimum tapered allowance £10,000 n/a n/a n/a
Lifetime allowance £1 million £1.25 million £1.5 million £1.8 million