Tax Rates 2016/17

Contents

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Introduction

Our Tax Rates Centre provides a summary of some of the essential tax rates, dates and figures for 2016/17.

2016/17 Tax Rates Centre is for guidance only and professional advice should be obtained before acting on any information contained as no responsibility can be accepted for loss occasioned as a result of action taken or refrained from in consequence of its contents.

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Income Tax

Income tax rates 1 2016/17 2015/16
  Starting rate limit (savings income) 2 *£5,000 *£5,000
  Starting rate 2 *0% *0%
Basic rate band – income up to £32,000 £31,785
  Basic rate 20% 20%
  Dividend ordinary rate, otherwise taxable at basic rate ***7.5% 10% (0%**)
Higher rate – income over £32,000 £31,785
  Higher rate 40% 40%
  Dividend upper rate, otherwise taxable at higher rate ***32.5% 32.5% (25%**)
Additional rate – income over £150,000 £150,000
  Additional rate 45% 45%
  Dividend additional rate, otherwise taxable at additional rate ***38.1% 37.5%
(30.6%**)
For 2016/17 Scottish taxpayers are effectively subject to the same income tax rates as the rest of the UK.

* If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate will not be available for savings income

For 2016/17, £1,000 of savings income for basic rate taxpayers (£500 for higher rate) may be tax-free.

** Effective rate with tax credit

*** For 2016/17 the first £5,000 of dividends are tax-free

Personal allowance (PA)
Born after 5 April 1938 3 £11,000 £10,600
Born before 6 April 1938 4 £11,000 £10,660
Income limit for PA 3 £100,000 £100,000
Income limit for PA (Born before 6 April 1938) 4 £27,700 £27,700
Blind person’s allowance £2,290 £2,290
Married couple’s allowance (MCA)
Either partner born before 6 April 1935 (relief restricted to 10%) 5 £8,355 £8,355
Transferable tax allowance (‘Marriage Allowance’)
For certain married couples and civil partners born after 5 April 1935 (relief 20%) 6 £1,100 £1,060
Tax Shelters
Venture Capital Trust (VCT) up to £200,000 £200,000
Enterprise Investment Scheme (EIS) up to £1,000,000 £1,000,000
Seed Enterprise Investment Scheme up to £100,000 £100,000
Social Investment Tax Relief £1,000,000 £1,000,000
Golden Handshake max. £30,000 £30,000

Notes

  1. From 2016/17 onwards, all individuals will be entitled to the same personal allowance, regardless of the individual’s date of birth.
  2. If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income.
  3. The personal allowance, including the minimum age-related allowance, is reduced by £1 for every £2 that adjusted net income exceeds £100,000, regardless of the individual’s date of birth.
  4. Personal allowances for those born before 5 April 1938 are reduced by £1 for each £2 of excess income over £27,700 until the basic allowance is reached.
  5. Similar limits apply to the married couple’s allowance. The reduction in allowance is subject to a minimum level of £3,220. (For couples married before 5 December 2005, only the husband’s income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
  6. Available to spouses/civil partners born after 5 April 1935. The allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction at 20% of the transferred amount.

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Capital Gains Tax

Capital gains tax rates and bands for 2016/17
On chargeable gains
Total taxable income and gains:
up to £32,000
from £32,001
10%
20%
Annual exemption
– individual £11,100
– most trustees £5,550
Transfers between husband and wife or civil partners living together are generally exempt.
Chattels exemption
(proceeds per item or set) £6,000

 

Entrepreneurs’ Relief

Qualifying gains will be taxed at 10%.

Claims may be made on more than one occasion up to a “lifetime” total of £10 million.

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Corporation Tax

Financial Year to 31 March 2017 31 March 2016
Corporation Tax rate 20% 20%

Capital Allowances

Plant and Machinery:

Investment for use in Enterprise Zones, energy saving and environmentally beneficial equipment, new zero-emission goods vehicles, low CO2 emission (up to 75g/km) cars, natural gas/hydrogen refuelling equipment: First year allowance.  

100%

Annual investment allowance (AIA) – on the first £200,000 of investment
(excludes cars and other expenditure already qualifying for 100% FYA)

100%*
Writing down allowance on expenditure not qualifying for AIA or FYA:
    Long-life assets, integral features of buildings, cars over 130g/km 8%
    Other plant and machinery 18%
Business premises renovation: max initial allowance 100%  

* Transitional rules may apply
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Value Added Tax

From 1 April 2016
Standard rate 20%
VAT fraction 1/6
Reduced rate 5%
Taxable Turnover Limits
Registration – last 12 months or next 30 days over £83,000
Deregistration – next 12 months under £81,000
Cash accounting scheme – up to £1,350,000
Optional flat rate scheme – up to £150,000
Annual accounting scheme – up to £1,350,000

VAT on fuel for private use in cars

Where businesses wish to reclaim the input VAT on fuel which has some degree of private use, they must account for output VAT for which they may use the flat rate valuation.

The table shows the VAT chargeable for quarters commencing on or after 1 May 2015. These rates were current at the date of publication. Please check with us for any updated rates from 1 May 2016.

CO2 emissions
(g/km)
Quarterly VAT
Flat Rate Valuation VAT on Charge
0-124 £133 £22.17
125-129 £200 £33.33
130-134 £213 £35.50
135-139 £227 £37.83
140-144 £240 £40.00
145-149 £254 £42.33
150-154 £267 £44.50
155-159 £281 £46.83
160-164 £294 £49.00
165-169 £308 £51.33
170-174 £320 £53.33
175-179 £334 £55.67
180-184 £347 £57.83
185-189 £361 £60.17
190-194 £374 £62.33
195-199 £388 £64.67
200-204 £401 £66.83
205-209 £415 £69.17
210-214 £428 £71.33
215-219 £441 £73.50
220-224 £455 £75.83
225 and above £468 £78.00

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Inheritance Tax

2016/17 2015/16
Standard threshold £325,000 £325,000
Combined threshold maximum for married couples and civil partners £650,000 £650,000
Rate of tax on balance:
    Chargeable lifetime transfers
Transfers on, or within 7 years of, death
20%
*40%
20%
*40%
* A lower rate of 36% applies where 10% or more of a deceased person’s net estate is left to charity

 

All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. Tax attributable to such transfers is then subject to Taper Relief:

Years before death 0-3 3-4 4-5 5-6 6-7
Tax reduced by 0% 20% 40% 60% 80%

 

Main Reliefs
Business property:
– business or interest therein 100%
– qualifying shareholdings in unquoted* companies 100%
– land, buildings, machinery, or plant used by transferor’s controlled company or partnership 50%
Agricultural property 100% or 50%
*Unquoted companies include those listed on AIM


Main Exemptions

  1. Most transfers between spouses and civil partners.
  2. The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year.
  3. Gifts of up to but not exceeding £250 p.a. to any number of persons.
  4. Gifts in consideration of marriage or civil partnership of: up to £5,000 by a parent, up to £2,500 by a grandparent or great grandparent, or up to £1,000 by any other person.
  5. Gifts made out of income that form part of normal expenditure and do not reduce the standard of living.
  6. Gifts to charities, whether made during lifetime or on death.

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Vehicle Benefits

Chargeable on employees earning £8,500 or over (including benefits), and directors.

Car Benefit

The taxable benefit is calculated as a percentage of the list price of the car, on the day before it was first registered, plus certain accessories. This percentage depends upon the rate at which the car emits carbon dioxide (CO2), and the fuel type.

From April 2015, the five year exemption for zero carbon and the lower rate for ultra-low carbon emission cars came to an end. Two new bands were introduced for ultra-low emission vehicles (ULEVs). These were set at 0-50 g/km (5%) and 51-75 g/km (9%). The appropriate percentages for the remaining bands increased by 2% for cars emitting more than 75 g/km, to a new maximum of 37%.

You can find the appropriate percentage for 2016/17 using the following table:

CO2 emissions
(g/km)
Appropriate percentage
Petrol % Diesel %
0-50 7 10
51-75 11 14
76-94 15 18
95-99 16 19
100-104 17 20
105-109 18 21
110-114 19 22
115-119 20 23
120-124 21 24
125-129 22 25
130-134 23 26
135-139 24 27
140-144 25 28
145-149 26 29
150-154 27 30
155-159 28 31
160-164 29 32
165-169 30 33
170-174 31 34
175-179 32 35
180-184 33 36
185-189 34 37
190-194 35
195-199 36
200 and above 37

 

CO2 emission information

For all cars first registered from at least November 2000, the definitive CO2 emissions figure for tax purposes is recorded on the Vehicle Registration Document (V5). Under an agreement with HM Revenue & Customs (HMRC), the Society of Motor Manufacturers and Traders (SMMT) is providing a CO2 emissions enquiry service on their website at www.smmt.co.uk for cars first registered from January 1998.

Reliable emissions data is not widely available for cars registered before 1 January 1998.
For them, the following taxable percentages apply, regardless of fuel type:

Engine capacity Taxable %
Up to 1400cc 15%
1401 – 2000cc 22%
Over 2000cc 32%

 

Car fuel benefit

The taxable car fuel benefit, for 2016/17, is calculated by applying the CO2 based car benefit percentage to the car fuel benefit charge multiplier of £22,200.

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.

HMRC advisory mileage rates at the time of the Budget for employee private mileage reimbursement or employer reimbursement of business mileage in company cars are:

Fuel-Only Mileage Rates
Engine Size Petrol LPG
1400cc or less 10p 7p
1401cc – 2000cc 12p 8p
Over 2000cc 19p 13p
Engine Size Diesel
1600cc or less 8p
1601cc – 2000cc 10p
Over 2000cc 11p

 

Example: A company car driver has a car which, on the day before it was first registered, had a
list price of £21,000. It runs on petrol, and emits 177 g/km of CO2.

If we assume the driver pays tax at 40%, the 2016/17 tax bill on the car is: £21,000 x 32% x 40% = £2,688

If the employer provides any fuel used for private journeys and is not reimbursed for the cost, the 2016/17 tax bill for the fuel is: £22,200 x 32% x 40% = £2,842.

Company vans

The taxable benefit for the unrestricted use of company vans is £3,170 plus a further £598 of taxable benefit if fuel is provided by the employer for private travel.

Van and fuel charge Van Fuel Total
Tax (20% taxpayer) £634 £119.60 £753.60
Tax (40% taxpayer) £1,268 £239.20 £1,507.20
Tax (45% taxpayer) £1,426.50 £269.10 £1,695.60
Employer’s class 1A NICs £437.46 £82.52 £519.98

 

Van drivers can avoid a benefit charge if they agree not to use the van for personal journeys. Driving to and from work is acceptable so long as there is a reasonable amount of business use.

The flat rate of £3,170 is reduced by 80% to £634 for vans which cannot produce C02 engine emissions under any circumstances when driven. There is no fuel benefit for such vans.

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Mileage Allowances

It is quite normal practice for employees to be reimbursed at a reasonable mileage rate for business use of their own vehicles. The income tax and national insurance contributions (NICs) position is as follows:

A statutory system of Approved Mileage Allowance Payments (AMAPs) applies for employees using their own vehicles for business journeys, as follows:
Cars and vans:
on the first 10,000 miles in the tax year
on each additional mile above this
45p per mile
25p per mile
Motorcycles 24p per mile
Bicycles 20p per mile

 

It is no longer possible to make a claim for tax relief based on the actual receipted bills, nor claim capital allowances or interest on loans related to car purchases.

Unless the employee is reimbursed at a rate higher than the AMAP, the payments do not need to be reported on a P11D. If the employer pays less than these rates, it is possible for the employee to claim income tax relief for the shortfall.

Rates of up to 5p per mile, per passenger, are also tax- and NICs- free when paid for the carriage of fellow employees on the same business trip. This also covers volunteers who drive for hospital car services etc, even though they are not strictly employees.

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National Insurance Contributions

Class 1 Employee (primary)
Payable on weekly earnings of
Below £112 (lower earnings limit) 0%
£112 – £155 (primary threshold) 0%*
£155.01 – £827 (upper earnings limit) 12%**
Above £827 2%**
* No NICs are actually payable but notional Class 1 NIC is deemed to have been paid; this protects certain state benefit entitlements.

** Over state pension age, the employee contribution is generally nil

Employer (secondary)
Up to £156 (secondary threshold) Nil
Above £156 13.8%
£156.01 – £827 (upper secondary threshold – under 21s) 0%
£156.01 – £827 (apprentice upper secondary threshold for under 25s) 0%
Employment Allowance Up to £3,000 (per year)
Class 1A (on relevant benefits) 13.8%
Class 1B (on PAYE settlement arrangement) 13.8%
Class 2 (Self employed) £2.80 per week
Small profits threshold £5,965 per annum
Class 3 (Voluntary) £14.10 per week
Class 3A
Voluntary contributions may be available to 5 April 2017 in order to obtain extra additional State Pension (maximum £25 a week) – variable contribution rates according to age.
Class 4* (Self employed on annual profits)
£8,060 – £43,000 9%
Excess over £43,000 2%
*Exemption applies if state pension age was reached by 6 April 2016.

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Key Dates and Deadlines

Payment Dates
Income Tax and National Insurance Contributions
31 July 2016 2015/16 second payment on account
31 January 2017 2015/16 balancing payment, and
2016/17 first payment on account
31 July 2017 2016/17 second payment on account
31 January 2018 2016/17 balancing payment, and
2017/18 first payment on account
Class 1A NICs
19 July 2016 2015/16 payment due
Capital Gains Tax
31 January 2017 2015/16 Capital Gains Tax
31 January 2018 2016/17 Capital Gains Tax
Corporation Tax
9 months and one day after the end of the accounting period (or by quarterly instalments if large company)
Inheritance Tax
6 months after the end of the month of death.
For chargeable lifetime transfers, due date is six months after the end of the month in which the transfer was made.
Latest Filing/Issuing Deadlines – 2015/16 PAYE Returns
31 May 2016 Issue P60s to employees.
6 July 2016 P11D and P11Db – also issue copies to employees
Form 42 (reporting of employment-related securities)
2016 Self Assessment Tax Return (SATR)
31 October 2016 Last filing date – SATR Paper Version
30 December 2016 SATR Online if outstanding tax (subject to cap) to be included in 2017/18 PAYE code
31 January 2017 Last filing date – SATR Online

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Pension Premiums and Withdrawals

There is no financial limit on the amount that may be contributed to a registered pension scheme. The maximum amount on which an individual can claim tax relief in any tax year is the greater of the individual’s UK relevant earnings or £3,600 (gross).

From 6 April 2016 the annual allowance may be reduced by £1 for every £2 of adjusted income over £150,000 to a minimum of £10,000.

All pension input periods open on 8 July 2015 were closed on that date, with the next input period running from 9 July 2015 to 5 April 2016. All subsequent input periods will be concurrent with the tax year from 2016/17 onwards.

For the sake of fairness during this alignment process, savers may be able to receive an additional annual allowance entitlement. They may be able to receive tax relief on up to £80,000 of pension contributions for 2015/16, with a maximum of £40,000 being available for the period 9 July 2015 to 5 April 2016.

In addition, an individual may have unused brought forward amounts.

The maximum age for tax relief is 74. The lifetime allowance charge applies to cumulative benefits exceeding £1m*. Inheritors can access pension funds worth up to £1m tax-free where savers die before reaching 75. Pensions inherited after the saver reaches 75 will be subject to recipient’s marginal rate of tax.

From April 2015 people aged 55 or over can withdraw any sum from their Defined Contribution pension savings. On most withdrawals 25% of the total will be tax-free with the rest subject to income tax at the pensioner’s marginal rate.

*Subject to transitional protection for excess amount.

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Charitable Giving

Gift Aid

  1. Individuals are able to claim higher rate relief on cash gifts and payments to charities under gift aid. Basic rate tax is treated as having been deducted, so you must pay enough tax for the year to cover the tax witheld from your Gift Aid payment.
  2. Special tax reliefs apply to gifts to charities of certain types of shares and securities, or land and buildings.
  3. Individuals have the opportunity to make a claim for charitable donations made in one tax year to be treated as if they had been made in the previous tax year. For example, a request could be made for Gift Aid payments made between 6 April 2016 and the date that the 2016 return is filed to be treated as if they were made in the year to 5 April 2016. This would mean that a payment could rank for higher rate tax relief for 2015/16, even if the donor is liable at basic rate only in 2016/17. The request would normally be made by completing the relevant box in the 2016 tax return, and the opportunity to carry back donations is lost once that return has been filed (provided this is no later than 31 October 2016 or 31 January 2017, as appropriate). It is not possible to amend the 2016 tax return in order to carry back a donation.

Give As You Earn

  1. Employees may authorise participating employers to deduct donations from their gross salary for forwarding to their nominated charities.
  2. Employees receive tax relief in full on their donations.

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Tax-Free Savings and Investments

ISAs

Individual Savings Accounts (ISAs)
ISAs 2016/17
Overall investment limit £15,240
Junior ISA limit £4,080

 

Notes

  1. Investments in ISAs are free of income tax and capital gains tax.
  2. Those aged 16-17 can invest in a cash ISA, in addition to a Junior ISA.
  3. ISAs allow you to take your money out at any time without losing tax relief and furthermore you are not required to declare income and capital gains from ISA savings.
  4. Transitional rules may apply.

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Some Useful Rates

  Weekly Benefit
  2016/17 2015/16
Basic Retirement Pension    
Single person £119.30 £115.95
Couple £190.80 £185.45
Pension Credit Standard Minimum Guarantee    
Single person £155.60 £151.20
Couple £237.55 £230.85
New State Pension    
  £155.65 N/A
Child Benefit    
First eligible child £20.70 £20.70
Each subsequent child £13.70 £13.70
Statutory Sick Pay (SSP)    
Average weekly earnings £112 or over (2015/16 £112) £88.45 £88.45
Statutory Maternity Pay (SMP)    
90% of average weekly pay First 6 weeks First 6 weeks
Lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings Next 33 weeks Next 33 weeks
Minimum rate £100.80 £100.80
Statutory Adoption Pay (SAP) 39 weeks 39 weeks
Statutory Paternity Pay (SPP)* 2 weeks 2 weeks
Both SAP and SPP    
Lower of £139.58 (2015/16 £139.58) or 90% average weekly earnings
Minimum rate £100.80 £100.80
*Additional statutory paternity pay (ASPP) has been replaced by shared parental leave.
 
Jobseeker’s Allowance    
Single person (25 or over) £73.10 £73.10
Couple (both 18 or over) £114.85 £114.85
National Living Wage From 1 April 2016  
Age 25 and over £7.20  
National Minimum Wage From 1 Oct 2016 From 1 Oct 2015
  21 – 24 £6.95 £6.70
18 – 20 £5.55 £5.30
16 and 17 £4.00 £3.87
Apprentices* £3.40 £3.30

*Rate applies to apprentices under 19, or those 19 and over in the first year of apprenticeship.

Universal Credit (monthly rates)    
Single person (25 or over) £317.82 £314.67
Couple (where one or both 25 or over) £498.89 £493.95

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Stamp Taxes

On the transfer of property in England, Wales and Northern Ireland, the SDLT is:

  Residential Property
  Sole Additional
Value up to £40,000 0% 0%
Over £40,000 to £125,000 0% 3%
Over £125,000 – £250,000 2% 5%
Over £250,000 – £925,000 5% 8%
Over £925,000 – £1,500,000 10% 13%
Over £1,500,000 12% 15%
Residential SDLT calculated on the consideration falling within each band. Additional SDLT of 3% may apply to the purchase of additional residential properties from 1 April 2016.
Non-residential  
Value up to £150,000 0%
Over £150,000 – £250,000 2%
Over £250,000 5%
From 17 March 2016 the calculation of SDLT on purchase of non-residential property was changed from the whole transaction value to the same basis as residential (consideration falling within each band).

SDLT rates for leasehold rent transactions have also changed, with a new 2% rate on leases with a net present value (NPV) over £5 million.

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Land and Buildings Transaction Tax (LBTT)

On the transfer of property in Scotland, the Land and Buildings Transaction Tax is:

Residential  
Value up to £145,000 0%
Over £145,000 – £250,000 2%
Over £250,000 – £325,000 5%
Over £325,000 – £750,000 10%
Over £750,000 12%

Non-residential  
Value up to £150,000 0%
Over £150,000 – £350,000 3%
Over £350,000 4.5%

The rates apply to the portion of the total value which falls within each band. Additional LBTT of 3% may apply to the purchase of additional residential properties from 1 April 2016.