Financial Planning

New tax rates and allowances for 2017/18

6 April marked the beginning of the 2017/18 tax year and the arrival of new tax rates and allowances. Here we give you a roundup of the latest figures to help you stay informed.

Pensions, ISAs and Junior ISAs

We believe it makes good sense to make the most of your ISA and pension allowances as early as possible each tax year. This helps you to maximise both the potential for investment gains and the length of time your money is protected from tax charges.

Individual Savings Accounts (ISAs)  

 

2016/17

2017/18

 ISA allowance

£15,240

£20,000

Junior ISAs

 

2016/17

2017/18

 Junior ISA allowance

£4,080

£4,128

Child Trust Funds (CTFs)

 

2016/17

2017/18

 CTF allowance

£4,080

£4,128

Pensions

 

2016/17

2017/18

Annual allowance

£40,000

£40,000

Lifetime allowance

£1,000,000

£1,000,000

Unused annual allowances from the previous three tax years may be carried forward. The 2017/18 annual allowance is subject to 50% taper down to £10,000 if your threshold income is over £110,000 and adjusted income over £150,000. From 6 April 2018 the lifetime allowance will increase in line with the Consumer Prices Index. There is a 55% lifetime allowance tax charge if the excess is drawn as a lump sum, and a 25% charge if the money is taken as income.

Income Tax rates

2016/17

 

2017/18

 

Band (£)

Rate (%)

Band (£)

Rate (%)

Nil - 32,000 (Basic)

20

Nil - 33,500* (Basic)

20

32,001 - 150,000 (Higher)

40

33,500* - 150,000 (Higher)

40

Over 150,000 (Additional)

45

Over 150,000 (Additional)

45

*£31,500 in Scotland.

Your first £5,000 of savings income is tax-free if you meet the non-savings income requirements. From 6 April 2016 the 10% tax credit on dividends was removed. A £5,000 dividend allowance is introduced (effectively a 0% rate). Above £5,000 dividends will be taxed at 7.5% (for basic and standard rate taxpayers), 32.5% (for higher-rate taxpayers) and 38.1% (for additional-rate taxpayers).

The basic personal allowance has increased from £11,000 to £11,500. From 2016/17 onwards, all individuals are entitled to the same personal allowance, regardless of their date of birth. This is reduced by £1 for every £2 of income over £100,000.

In addition, a new Personal Savings Allowance (PSA) lets you earn up to £1,000 interest (or £500 if you are a higher-rate taxpayer) in savings with no Income Tax to pay.

Capital Gains Tax – individuals

 

2016/17

2017/18

Exemption

£11,100

£11,300

Standard rate

10%

10%

Higher rate

20%

20%

Additional rate

20%

20%

There will be an additional 8% surcharge to be paid on residential property (excluding main home).

Inheritance Tax

 

2016/17

2017/18

Nil rate band

£325,000

£325,000

Residence nil rate band

N/A

£100,000

Rate of tax on excess

40%

40%

Reduced tax charge on gifts made within seven years of death:

Years before death

0-3

3-4

4-5

5-6

6-7

% of IHT charged

100

80

60

40

20

Up to 100% of the unused proportion of a deceased spouse’s/civil partner’s nil rate band can be claimed on the survivor’s death.

The residence nil rate band is a new allowance for passing on the family home. The allowance is currently £100,000 and will increase over the next three years, up to £175,000 in April 2020. The residence nil rate band is tapered down for people with larger estates – it will reduce by £1 for every £2 that your estate is valued over the £2 million mark.

The rate of Inheritance Tax reduces from 40% to 36% where at least 10% of net chargeable estate is left to charity for death after 5/4/2012.

Speak to a financial planner

For more information about using your tax allowances, please book a no-obligation consultation with a Tilney financial planner. Simply complete this short online form, call us on 020 7189 2400 or email contact@tilney.co.uk.

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