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INCOME TAX RATES AND RELIEFS FOR 2017/2018

8th March 2017 BUDGET PROPOSALS
AND CHANGES FOR 2017/2018 previously announced
(Subject to details in the Finance Bill)
Ellis Atkins have taken all due care in the presentation of these notes. No responsibility for loss occasioned to any person or company acting or refraining from action as a result of any material in these notes can be accepted by Ellis Atkins, its partners or staff. Please contact us or your own professional advisor for advice specific to your circumstances.

The basic rate remains at 20%.

The higher rate remains at 40%. The threshold, including the personal allowance of £11,500, for the forthcoming year will be £45,000 from 6 April 2017. The additional rate of 45% for taxable income above £150,000 remains unchanged.

As for the previous year there will be a personal saving allowance so that the first £1,000 of savings income for basic rate taxpayers and the first £500 for higher rate taxpayers will not be taxable. There is no personal savings allowance for additional rate tax payers.

The tax rate for investment income (other than dividends) will therefore be either 0%, 20%, 40%, or 45% of gross income.

For 2017/18, the dividend allowance enables the first £5,000 of dividend income to be received tax free. Any dividends above that figure, will be taxed as follows:

within basic rate band £33,5007.5%
higher rate band £33,501-£150,00032.5%
additional rate band over £150,00038.1%

From the 6 April 2018 the dividend allowance will be reduced to £2,000 per annum.

2017/2018Increase2016/2017
Allowances receiving relief at Top rate of tax:
£££
Personal Person11,50050011,000
Age 65-74: Single11,50050011,000
Age 75+: Single11,50050011,000
Blind person2,320302,290
Allowances receiving relief at 10%
Married couple’s allowance (including civil partnerships), where one partner is born before 6th April 1935:8,445908,355
Minimum allowance3,260403,220
  • The Age and Married Couple’s Allowances abate by £1 for every £2 of income over £28,000 until they are reduced to the Personal Allowance.
  • In addition, the Personal Allowance for individuals will be reduced by £1 for every £2 above an adjusted income of £100,000. The Personal Allowance will therefore be reduced to £nil for incomes of £123,000 and above from April 2017.

New tax allowance for money earned from the sharing economy

From April 2017 there will be two further allowances, namely:-

a. Where an individual has occasional jobs in regard to selling goods, or providing services or,
b. If an individual rents a driveway or loft storage for example,

the first £1,000 of income will be tax free.

Car and fuel benefits

The system of car and fuel benefits based on the level of carbon dioxide emissions continues. From 2017/18, the 37% maximum percentage of the list price of a car when new is reached at 175g/km for diesel and 190g/km for petrol vehicles.

Cars propelled solely by electricity continue to attract a 9% benefit in 2017/18.

The figure used as the basis for calculating the benefit of private fuel received for a company car is increased to £22,600 from April 2017.

Van benefits

As before, there is no benefit charge for employer provided vans that have insignificant or no private use.

The benefit charge for unrestricted private use of employer provided vans remains at £3,230 with an additional £610 if the employer also provides fuel for private use.

Where a company provides a van that does not emit CO2, the charge is limited to 20% of the charge for a conventional van for 2017/18 and will then increase on a tapered basis to 5 April 2022.

Authorised Mileage Rates

The authorised mileage rates for all vehicles for business use of employees' own vehicles remains at 45p for the first 10,000 miles and 25p thereafter for cars, 24p for all miles for motorcycles and 20p for bicycles.

Limits on Income Tax Reliefs

The annual cap on income tax reliefs is still the greater of £50,000 or 25% of income.

Tax changes for Residential Property

  • For residential lettings, relief will be restricted on any higher rate tax relief claimed in regard to loan interest costs. The relief will be removed over 4 years from 2017/18 to 2020/21 and thereafter only a basic rate tax deduction from an individual’s income tax liability will be available.
  • Any Non-Residents disposing of UK Residential property are subject to capital gains tax after April 2015 (the new rules do not apply to gains relating to periods before 5 April 2015). The rate of capital gains tax chargeable is 18% or 28% and a notification must be made to HM Revenue & Customs within 30 days of conveyance to advice of the disposal, otherwise penalties similar to those raised for late tax returns will be issued.