The personal allowance has been increased to £11,500 but as in previous years, the allowance is reduced by £1 for every £2 by which income exceeds £100,000 i.e. those with income of £123,000 or more will loose theirs. The marriage allowance, which allows people to transfer 10% of their personal allowance to their spouse/civil partner as long as the recipient is not a higher or additional rate taxpayer, is therefore £1,150. Claiming the marriage allowance is worthwhile where not to would mean personal allowance is wasted. The allowance give a total £230 saving for the one benefiting.
The married couples allowance (which is not the same thing as the marriage allowance) is available to married couples and civil partners where one or both were born before 6 April 1935. The allowance is set at £8,445, but reduced by £1 for every £2 by which income exceeds £28,000 until it reaches £3,260.
The tax-free savings allowance remains at £1,000 for basic rate taxpayers and at £500 for higher rate taxpayers. Those paying tax at the additional rate do not receive a savings allowance.
The new rules for the taxation of dividends (from April 2016) saw all taxpayers being entitled to a dividend allowance regardless of the rate at which they pay tax. This allowance is unchanged at £5,000, however we now know the plan is to reduce it to £2,000 from 6 April 2018.
Moving on to tax rates & bands for 2017/18 it is worth noting that basic rate income tax remains at 20%, higher rate at 40% and the additional rate is still 45%. For the UK (but excluding Scotland) the basic rate band is set at £33,500 and the additional rate of tax applies to taxable income exceeding £150,000.
Finally dividends in excess of the dividend allowance (above) are still taxed at 7.5% where they fall within the basic rate band, 32.5% at higher rate and 38.1% if within the additional rate band.
Capital gains tax
It is good news all around for CGT with the annual exempt amount increasing to £11,300 for the tax year ended 5 April 2018. In addition to this the new favourable tax rates remain unchanged at 10% to the extent that total income and gains do not exceed the basic rate band, and 20% where total income and gains exceed the basic rate band. Unfortunately the higher rates of 18% and 28% respectively which apply to gains on residential property remain unchanged also.
If you need advice in this area then we are here to help.