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Tax allowances for 2017-18

6th Apr, 2017

By Robert Little

We are now in the new tax year which means there are new tax allowances, savings allowances and pensions allowances available for UK taxpayers. This post sets out the key allowances and a brief description of each.

If you wish to discuss making use of any of these allowances please get in touch via our Contact page and book a free initial meeting with one of our advisers.

Tax allowances

Personal allowance

Brief description: the amount of income you can earn tax-free within the tax year
Amount for 2016-17: £11,000
Amount for 2017-18: £11,500

Higher rate income allowance

Brief description: the amount of income you can earn after the personal allowance before becoming liable to higher rate tax (40%)
Amount for 2016-17: £32,000 (so if you had income over £11,000 plus £32,000 you should have paid some 40% income tax)
Amount for 2017-18: £33,500 (so if you have income over £11,500 plus £33,500 you will pay some 40% income tax)

Additional rate income allowance

Brief description: the amount of income you can earn before becoming liable to additional rate tax (45%)*
Amount for 2016-17: £150,000 (so if you have income over £150,000 you will pay some 40% income tax)
Amount for 2017-18: £150,000 (so if you have income over £150,000 you will pay some 40% income tax)

* Please note that if you earn over £100,000 in 2016/17 or 2017/18 you will lose some or all of your personal allowance

Income tax rates

Brief description: the rates of income tax payable on all income EXCEPT dividend income over and above the £11,500 tax-free personal allowance
Rates for 2017-18 (no change from 2016-17):
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Dividend allowance

Brief description: the amount of dividend income you can earn before becoming liable to pay income tax
Amount for 2017-18 (no change from 2016-17): £5,000

Dividend tax rates

Brief description: the rates of income tax payable on dividend income over and above the £5,000 tax-free dividend allowance
Rates for 2017-18 (no change from 2016-17):
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Personal Savings Allowance

Brief description: the amount of interest you can earn before becoming liable to pay income tax
Amounts for 2017-18 (no change from 2016-17):
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You can read more about this allowance here: Personal Savings Allowance

Inheritance tax nil rate band

Brief description: the amount a deceased person’s estate can leave to anyone other than a spouse or civil partner and remain free of Inheritance Tax
Amount for 2017-18 (no change from 2016-17): £325,000 (this can be doubled to £650,000 for most people who are married or in a civil partnership)

Main residence nil rate band (new for 2017-18)

Brief description: a top-up to the standard nil rate band which is set against the value of the deceased’s home as long as the home is left to the deceased’s child(ren) or grandchild(ren)
Amount for 2017-18: £100,000 (this can be doubled to £200,000 for most people who are married or in a civil partnership)

Capital gains tax allowance

Brief description: the amount of “capital gains” (or profit) you can make on an asset such as a property or investment before becoming liable to pay Capital Gains Tax. Note that if you sell your main residence (i.e. your home) it will not be assessed for Capital Gains Tax purposes regardless of any profit you make.
Amount for 2016-17: £11,100
Amount for 2017-18: £11,300

Capital Gains Tax rates

Brief description: the rates of Capital Gains Tax payable on gains made over and above the £11,300 tax-free Capital Gains Tax allowance. Unlike previous tax years there are different rates for sales of investment properties and all other assets. An investment property is any property other than your main residence.
Rates for 2016/17:

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Savings and Pensions allowances

ISA allowance

Brief description: the maximum amount you can save into an ISA in the current tax year. This can be split between one Cash ISA and one Stocks and Shares ISA or it can be invested entirely in either a Cash ISA or a Stocks and Shares ISA, but no more than this amount can be saved in total in the current tax year.
Amount for 2016-17: £15,240
Amount for 2017-18: £20,000

Junior ISA

Brief description: the amount you can save into a Junior ISA (for a child aged under 18) in the current tax year. This can be invested in either a Cash JISA or a Stocks and Shares JISA.
Amount for 2016-17: £4,080
Amount for 2017-18: £4,128

Help to Buy ISA

Brief description: the maximum amount a first-time buyer can save into a Help to Buy ISA in the current tax year. You can’t open a Help to Buy ISA if you have already opened a Cash ISA or a Stocks and Shares ISA since 06/04/2017 (unless permitted to do so by your chosen Help to Buy ISA provider). The Government will add a bonus on top of any contributions when the money is eventually used to purchase a house. The bonus is 25% of the amount saved into the Help to Buy ISA.
Amount for 2017-18 (no change from 2016-17): £200 per month. You can invest an extra £1,000 in the first month you open the Help to Buy ISA (so you can save a maximum of £1,200 in the first month).

Lifetime ISA (new for 2017-18)

Brief description: the maximum amount someone aged between 18 and 50 can save into a Lifetime ISA in the current tax year. Note that you must be under age 40 to open a Lifetime ISA but, once it is opened, you can save into the Lifetime ISA until age 50. The Government will add a bonus on top of any contribution if the money is eventually used to purchase a house or is withdrawn after age 60 (if the money is withdrawn for any other reason you will lose the bonus plus an extra 5%). The bonus is 25% of the amount saved into the Lifetime ISA.
Amount for 2017-18: £4,000 per year

You can read more about this product here: Lifetime ISA

Annual Allowance

Brief description: the maximum amount you can save into all your pension plans in the current tax year and still receive full income tax relief. This assumes you are not subject to either the Money Purchase Annual Allowance or the Tapered Annual Allowance.
Amount for 2017-18 (no change from 2016-17): £40,000 (after tax relief is added)

You can read more about these allowances here:
Tapered Annual Allowance and
Annual Allowance

Money Purchase Annual Allowance

Brief description: the maximum amount you can save into all your pension plans in the current tax year and still receive full income tax relief. You will be eligible for the Money Purchase Annual Allowance rather than the standard Annual Allowance if you have gone through a “trigger event”, which includes taking pension benefits (other than a tax-free lump sum) under the “flexible pensions” rules which were introduced on 06/04/2015
Amount for 2016-17: £10,000 (after tax relief is added)
Amount for 2017-18: £4,000 (after tax relief is added)

Lifetime Allowance

Brief description: the maximum amount of benefits you can take out of all your pension plans in the current tax year without being subject to a Lifetime Allowance charge.
Amount for 2017-18 (no change from 2016-17): £1,000,000

You can read more about this allowance here: Lifetime Allowance

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