Tax Facts 2017-18

Welcome to the 2017-18 Budget Tax Facts

This document is prepared for guidance only. We recommend that you contact us for advice before acting on any information contained in these pages and we cannot accept responsibility for any action taken without such advice..

Personal Taxation

Main personal allowances

2017/182016/17
Personal income tax allowance (PA)£11,500£11,000
Marriage allowance (transferable)£1,150£1,100
Blind person's allowance£2,320£2,290
Rent-a-room relief£7,500£7,500
Trading Income£1,000N/A
Property Income£1,000N/A

Notes

  1. PA is reduced by £1 for every £2 by which Adjusted Net Income (ANI) exceeds £100,000, so PA is nil when ANI is £123,000.
  2. ANI is total taxable income less qualifying pension contributions and Gift Aid donations.
  3. Marriage allowance is the transferable part of the PA and is available only to married couples and civil partners born after 5 April 1935. It can be transferred to their spouse or civil partner as long as the recipient is not taxed at more than 20%.
  4. The Rent-a-room exemption is available where the taxpayer lets out part of the home they live in as furnished residential accommodation.
  5. Where trading income exceeds £1,000, that limit (rather than expenses) may be deducted from gross income.
  6. Where property income exceeds £1,000, that limit (rather than expenses) may be deducted from gross property rents.

Income tax bands

 2017/182016/17
Savings rate band£5,000£5,000
Basic rate band (BRB)£33,500£32,000
Higher rate band (HRB)£33,501-£150,000£32,001-£150,000
Additional rateover £150,000over £150,000
Scottish taxpayers
– BRB£31,500£32,000
– HRB£31,501-£150,000£32,001-£150,000
Personal Savings Allowance (PSA)
– Basic rate taxpayer£1,000£1,000
– Higher rate taxpayer£500£500
Dividend Nil Rate Band (DNRB)£5,000£5,000

Notes

  1. Savings band only applies to savings income. If taxable general income ('non-savings income') exceeds this band, the savings rate (see below) does not apply.
  2. The BRB and additonal rate threshold are extended by the grossed-up equivalent of personal pension contributions and Gift Aid donations paid by the taxpayer in the tax year, or treated as paid in the tax year.
  3. Taxable income usually uses up the rate bands in the following order:

Income tax rates

  • G 'general income' (employment, pensions, business profits, rent)
  • S 'savings income' (mainly interest)
  • D 'dividends' (distributions from companies/most unit trusts)
 2017/18 & 2016/17
Rates differ for:GSD
Basic rate20%20%7.5%
Higher rate40%40%32.5%
Additional rate45%45%38.1%

Note

  1. The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%. It is not available to a top rate taxpayer.
  2. Dividends are usually taxed as the ‘top slice’ of income. The DNRB taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply.

Remittance basis charge

Resident in the UK for2017/182016/17
7 of the preceding 9 tax years£30,000£30,000
12 of the preceding 14 tax years£60,000£60,000
17 of the preceding 20 tax yearsN/A£90,000

Note

  1. The remittance basis charge (RBC) is payable by non-UK domiciled individuals who claim the remittance basis and who have been resident in the UK for the periods shown.
  2. From 2017/18, individuals who have been resident in the UK for 15 of the previous 20 years are deemed to be UK domiciled for Income Tax, Capital Gains Tax and Inheritance Tax, so the remittance basis is not available to them.

High Income Child Benefit charge (HICBC)

 2017/182016/17
Lower threshold£50,000£50,000
Upper threshold£60,000£60,000

Notes

  1. Only applicable to families who receive child benefit, where adjusted net income of highest earner is above lower threshold.
  2. HICBC is equivalent to 1% of child benefit received by the family, for every £100 of adjusted net income over lower threshold.
  3. Highest earner in family must declare child benefit received by them or their partner on their tax return.
  4. The recipient of child benefit can elect not to receive it in order to avoid the HICBC, without losing their right to accrue certain state benefits. Child benefit payments can subsequently be recommenced if the claimant chooses.

Pensions

Registered pensions

Registered pensions2017/182016/17
Lifetime Allowance (LA)£1m£1m
Annual Allowance (AA) - maximum£40,000£40,000
Annual Allowance - minimum£10,000£10,000
Money Purchase Annual Allowance (MPAA)£4,000£10,000

Notes

  1. Contributions to registered personal pension schemes are paid net of basic rate tax. The policyholder pays 80% and HMRC pay 20%.
  2. Tax relief at the taxpayer’s marginal income tax rate is given on pension contributions up to 100% of earnings, capped by the AA. Relief is given by increasing the basic rate band and higher rate threshold by the grossed-up amount of the contributions paid in the year.
  3. Those with little or no UK relevant earnings can make pension contributions up to £3,600 gross (£2,880 net) per year.
  4. AA can be increased by unused allowance brought forward from the previous three tax years.
  5. AA is usually tapered down by £1 for every £2 of adjusted income over £150,000, to a minimum of £10,000.
  6. Annual allowance charge is levied at the individual’s marginal rate for contributions exceeding the annual allowance.
  7. Employers can contribute to the employee’s pension fund up to the AA per year, less any contributions made by the individual. Employer will enjoy tax relief on those contributions under the normal rules for business expenses.
  8. Investors in personal and other defined contribution pension schemes can access all of their pension savings once they reach age 55.
  9. When the investor takes benefits from such pension schemes under flexi-access drawdown, up to 25% of the accumulated fund can be drawn as a tax-free lump sum. The balance is taxed at the investor’s marginal rate of tax that applies in the year those benefits are drawn.
  10. LA is measured as the capital value of the pension benefits at the time pension benefits are first taken.
  11. LA charge is 55% if funds exceeding the LA are taken as a lump sum, or 25% if the benefits are taken as income.
  12. MPAA replaces AA where taxpayer has started to take taxable income from a defined contribution scheme. There is no carry forward of unused MPAA.

State pension

Maximum amount per week2017/182016/17
Old state pension – Single person£122.30£119.30
Old state pension – Married couple195.60190.80
New state pension159.55155.65

Notes

  1. An individual is eligible to draw the state retirement pension when he or she reaches State Pension Age (SPA). This currently varies for men and women, but for younger people the SPA is gradually increasing to 68.
  2. An individual who qualifies for the state pension may choose to defer claiming the pension. If the person defers for a period of 12 months or more, that person may opt to receive either the pension foregone as a lump sum or a higher pension.
  3. The state pension is taxable, as is any lump sum received if the state pension is deferred.
  4. Individuals who reach SPA on or after 6 April 2016 receive a flat rate state pension, which replaced the old state pension, the second state pension and pension credit.

Investment Reliefs

Annual investment limits2017/182016/17
Individual Savings Account (ISA)
– Overall limit£20,000£15,240
– Lifetime ISA (LISA)£4,000N/A
Enterprise Investment Scheme (EIS)£1,000,000£1,000,000
Seed EIS (SEIS)£100,000£100,000
Venture Capital Trust (VCT)£200,000£200,000
Social Investment Tax Relief (SITR)£1,000,000£1,000,000

Notes

  1. ISA investors can invest in any combination of cash or shares up to the overall limits shown.
  2. The Lifetime ISA (LISA) is introduced for 2017/18. Taxpayers aged between 18 and 40 may open an account and invest up to £4,000 each year, which qualifies for a 25% Government bonus on amounts invested up to the age of 50.
  3. This benefit is retained as long as the money is either
    • put towards a first home costing up to £450,000, or
    • kept in the account until reaching age 60, or
    • withdrawn after being diagnosed with a terminal illness.
  4. If the money is withdrawn in other circumstances, the bonus will be clawed back with an additional 5% charge. The £4,000 is part of the general ISA limit of £20,000, not additional to it.
  5. Junior ISA is available to UK residents aged under 18 and who don’t have a Child Trust Fund account. When the holder reaches age 18, their junior ISA becomes an adult ISA.
  6. EIS, VCT and SITR investments made within the limits shown attract 30% Income Tax relief, but those schemes all have different qualifying rules.
  7. SEIS investments attract 50% Income Tax relief.
  8. Where the disposal proceeds from any capital gain are reinvested under EIS or SITR in the four-year period that starts one year before the date of the gain, all or part of the original gain can be deferred.
  9. Gains reinvested under SEIS, within the same timeframe as for EIS, up to the investment limit attract 50% exemption from CGT.
  10. Investments made under EIS, SEIS and SITR can be carried back to be treated as made in the previous tax year, subject to the investment limits.
  11. Disposals of investments acquired under EIS, SEIS, SITR or VCT are exempt from CGT if investment conditions have not been broken.

National Insurance Contributions (NIC)

Class 1 NIC thresholds 2017/18

 weekmonthyear
Lower Earnings Limit (LEL)£113£490£5,876
Primary Threshold (PT)£157£680£8,164
Secondary Threshold (ST)£157£680£8,164
Upper Secondary Threshold (UST)£866£3,750£45,000
Upper Earnings Limit (UEL)£866£3,750£45,000

Notes

  1. No NIC are payable by employee or employer on earnings up to the PT (employees) or ST (employer).
  2. No employee NIC are payable once the employee reaches state retirement age, but employer NIC continue to be payable.
  3. No employer NIC are payable on earnings up to the UST for employees aged under 21, or apprentices aged under 25, at the date of the payment.
  4. No employee NIC are payable on earnings between the LEL and the PT, but when reported by the employer, the employee receives credit towards the State Pension.

Class 1 NIC rates 2017/18

 EmployeeEmployer
PT/ST to UEL12%13.8%
Above the UEL2%13.8%

Notes

  1. Employers and employees both contribute at rates dependent on the level of earnings during a weekly, monthly or annual earnings period.
  2. A person with more than one employment can defer the payment of some employee NIC until after the end of the tax year. The total amount payable is then checked and limited, so the full 12% rate is only applied to income between the PT and the UEL.
  3. An 'employment allowance' of £3,000 per qualifying business gives exemption from Class 1 Employer NIC. Some businesses are excluded, including certain sole director companies. Employee NIC are unaffected.

Class 2 NIC

Rates per week2017/182016/17
Flat rate£2.85£2.80
Small Profits Threshold (SPT)£6,025£5,965

Notes

  1. Self employed people pay Class 2 NIC if their profits exceed the SPT for the tax year.
  2. Both Class 2 and Class 4 NIC are collected through self assessment.

Class 3 NIC

Rates per week2017/182016/17
Class 3 flat rate£14.25£14.10

Notes

Anyone who wants to maintain State Pension rights may pay voluntary Class 3 NIC.

Class 4 NIC

Annual2017/182016/17
Lower profits limit£8,164£8,060
Upper profits limit45,00043,000
Main rate9.0%9.0%
Additional rate2.0%2.0%

Notes

  1. Class 4 NIC are payable on profits from UK trades or professions that exceed the lower profits limit and are chargeable to Income Tax.
  2. The additional rate is payable on profits that exceed the upper profits limit.
  3. An individual who is both employed and self employed may pay Class 1, Class 2 and Class 4 NIC, subject to the maximum limit for the year.

Employee Benefits

Car benefit 2017/18

 Percentage of chargeable value
CO2 emissions (g/km)PetrolDiesel
0-509%12%
51-7513%16%
76-9417%20%
Above 94Add 1% for every 5g/km
Above 189 (petrol)/ 174 (diesel)37%37%

Notes

  1. Where the car is provided by the employer, the employee is taxed on the ‘cash equivalent’, calculated as a percentage (based on its CO2 emissions) of the vehicle’s chargeable value.
  2. The chargeable value is the vehicle’s list price when new plus the cost of most accessories added, less any capital contribution of up to £5,000 from the employee.
  3. The employer must also pay Class 1A NIC at 13.8% on the cash equivalent amount of the benefit.

Car fuel benefit

 2017/182016/17
Benefit multiplier£22,600£22,200

Notes

  1. Where fuel is provided by the employer for private use in a company car, the percentage used to calculate the car benefit is applied to the benefit multiplier in order to determine the taxable benefit.
  2. The benefit is charged without reduction for contributions by the employee, unless all private fuel is paid for (in which case there is no benefit). For 2017/18, this must be done by 6 July 2018, but 2016/17 it must be done by 5 April 2017.
  3. Where the employer provides the car and the employee provides the fuel, HMRC’s advisory fuel mileage rates can be used to reimburse the cost of fuel used on business journeys. Those rates are updated each quarter and published at www.gov.uk/government/publications/advisory-fuel-rates.

Van benefits

 2017/182016/17
Ordinary van£3,230£3,170
Zero emissions van646634
Fuel benefit610598

Note

If the private use of a van is restricted to home-to-work travel, there is no tax charge, unlike for company cars.

Employment-related loans

 2017/182016/17
Official interest rate3%3%

Notes

  1. Where the total amount loaned to the employee exceeds £10,000 at any point in the tax year, the cash equivalent benefit is the excess of the official rate over any interest actually paid by the employee to the employer (provided there is a contractual agreement to pay that interest).
  2. Loans from a close company to directors or shareholders of the company may also generate a tax charge for the company.

Tax-free mileage allowances

Employee's own transportper business mile
Cars, first 10,000 miles45p
Cars, over 10,000 miles25p
Business passengers5p
Motorcycle24p
Bicycle20p

Notes

  1. Passenger must be completing the same business journey.
  2. For all except the business passengers allowance, if the employer does not pay the full mileage rate, the employee can claim tax relief on any shortfall from HMRC.

Childcare vouchers

Weekly exempt amount2017/182016/17
Basic rate taxpayer£55£55
Higher rate taxpayer£28£28
Additional rate taxpayer£25£25

Note

  1. Employees who joined the employer-provided childcare voucher scheme before 6 April 2011, and are still employed by that employer, continue to receive a benefit of £55 per week, whatever their marginal rate of tax.
  2. New Tax-free Childcare (TFC) accounts will be introduced in April 2017 and rolled out to all eligible parents over the coming year. They will eventually replace the childcare voucher scheme
  3. Under TFC, where both parents work and earn at least £115 per week (but neither earns more than £100,000 per year), they will be able to put up to £8,000 a year into an account, which the Government will top up with 25p for every £1 contributed by the parents. This account can only be used to pay for childcare up to the age of 12.
  4. The limits for parents of disabled children are doubled and contributions can continue up to the age of 17.
  5. Unlike the voucher scheme, TFC is available to the self employed.

Main exempt benefits

Benefit itemLimit of exemption
Mobile phoneOne per employee
Subsidised mealsFor all employees in a staff canteen
Works busesMust be used only or substantially by employees or their children
Bicycles and safety equipmentLoaned to employee
Pension contributionsAnnual allowance (see Investment Reliefs)
Personal incidental expenses when staying away from home£5 per night, £10 if abroad
Qualifying medical treatment£500 per employee per tax year
Eye test and spectacles or lensesRequired solely for VDU use
Health screening or medical check-upOne screening per tax year
Overseas medical treatmentWhen working abroad
Relocation expenses£8,000 per employee per move

Notes

  1. Many employee benefits are not charged to tax; the principal ones are listed above.
  2. The medical treatment must be recommended by an occupational health service and must be provided to help the employee return to work.

Employee share schemes

Type of share schemeTax advantages
Share Incentive Plan (SIP)
Free shares worth up to £3,600pa. Employee can buy up to £1,800pa out of pre-tax pay. Employer can match bought shares with up to two more.If shares left in the scheme for at least five years: no Income Tax or CGT on the value when they leave the scheme.
Enterprise Management Incentive (EMI)
Trading companies with fewer than 250 employees can grant options to selected employees to buy up to £250,000 worth of shares.No Income Tax or NIC if option is exercised within ten years of option grant. Shares qualify for 10% rate of CGT on disposal if grant is at least one year before disposal.
Company Share Option Plan (CSOP)
Share options to buy up to £30,000 of shares can be granted to employees.No Income Tax or NIC if option is exercised between three and ten years of grant. Gains on disposal are subject to CGT.
Save As You Earn (SAYE)
Employees contribute up to £500 a month to a savings scheme, and use money to exercise share options.No Income Tax or NIC if option is exercised three years or more after the grant of option. Gains on disposal are subject to CGT.

Notes

  1. Generally, employees are charged to Income Tax on the value of shares that they are given or are issued to them by their employer, less any amount paid for the shares. NIC are also charged if the company is quoted, or the shares can be easily sold. If the employer operates one of the above tax-advantage schemes, the tax charges may be eliminated, reduced or deferred.
  2. The employer must register the share scheme with HMRC, using the online Employment Related Securities (ERS) system, by 6 July following the end of the tax year in which the scheme is implemented.
  3. Employers must file an annual return for each share scheme online through ERS by 6 July each year.
  4. An automatic penalty of £100 applies for late submission of an annual share scheme return. Additional penalties of £300 apply on 7 October and 7 January if the annual return is still not filed by those dates. Further penalties of £10 per day apply from 7 April onwards.
  5. The above is a very brief summary of the main tax advantaged share schemes; other conditions apply.

Capital Gains Tax

Annual exemption

 2017/182016/17
Individuals and deceased estates£11,300£11,100
Most trusts£5,650£5,550

Notes

  1. Each individual is entitled to an annual exemption, but that exemption may be denied if he claims the remittance basis (see Personal Taxation).
  2. The annual exemption cannot be transferred or carried forward or back to another tax year.

Tax rate

 2017/18 & 2016/17
 Residential propertyOther
Individual - to limit of basic rate band18%10%
Individual - above basic rate band28%20%
Trusts and deceased estates28%20%

Notes

  1. CGT is payable on capital gains made in the tax year, after deduction of capital losses, available reliefs and the annual exemption.
  2. Receipts of carried interest by venture capital investors are taxed at the same rates as residential property.
  3. When a chargeable asset is given away, the donor is treated as receiving the full market value and is liable for CGT accordingly.
  4. There is no charge on disposals between spouses or registered civil partners who are living together. On such disposals, the transferee takes over the transferor’s CGT cost.
  5. There is no CGT on gains accrued to the date of a taxpayer’s death. Instead, the value of the estate may be subject to Inheritance Tax (see Inheritance Tax)

Entrepreneurs' Relief (ER)

 2017/182016/17
Lifetime limit£10m£10m
CGT on qualifying disposals10%10%

Notes

  1. Disposals made by individual or certain trustees can qualify for ER.
  2. The asset disposed of must have been owned for at least a year and be one of:
    • a business or an interest in a business
    • business assets sold within three years of the business ceasing
    • shares in a trading company of which the individual is an officer or employee and holds at least 5% of the ordinary share capital, or acquired the shares under an EMI scheme
    • assets used by the shareholder's personal company or partnership and sold at around the same time as 5% or more of the company's shares or partnership interest

Investors' relief

 2017/182016/17
Lifetime limit£10m£10m

Notes

  1. This relief was introduced by FA 2016 and gives a 10% CGT rate to certain investors in qualifying unquoted trading companies.
  2. Investors cannot be paid directors or employees of the company and must hold newly issued shares (acquired on/after 17 March 2016) for 3 years from 6 April 2016.Thus the earliest date on which a qualifying disposal can be made is 6 April 2019.
  3. The £10m limit on qualifying gains is in addition to that available for ER.

Other CGT reliefs

AssetConditions
Taxpayer's only or main homeGain is exempt for the periods the taxpayer lives there, or is deemed to live there, plus the last 18 months of ownership.
Chattels (tangible movable property)If bought and sold for less than £6,000.
Gifts to charityNot charged to CGT, and gifts of quoted shares and land also enjoy an income tax relief.
Assets which become of negligible valueDeemed to be sold at nil, to create loss, when an election is made.

Corporation Tax (CT)

Rates from1.4.20171.4.2016
Corporation Tax rate19%20%

Notes

  1. Most companies must pay their Corporation Tax within nine months and a day after the end of the accounting period.
  2. Large companies or groups generally make four quarterly payments on account of Corporation Tax, starting in the seventh month after the start of a 12-month accounting period. The payment is made on the 14th day of the relevant month, with interest running on any balance due until final settlement of the period’s liability.
  3. All companies must file Corporation Tax returns online 12 months after the end of the accounting period.

Research and Development

Effective from1.4.20171.4.2016
SME enhanced deduction130%130%
Large company above the line credit (RDEC)11%11%

Notes

  1. The above enhanced deduction is for qualifying revenue expenditure on qualifying R&D projects; various conditions apply to both terms.
  2. Where an SME makes a loss it can surrender that loss for a payable tax credit worth 14.5% of the loss.
  3. RDEC is a taxable expenditure credit for qualifying R&D.

Special reliefs

AreaRelief
Intangible assets: goodwill, know-how and patent rightsDeduction given according to depreciation in the accounts, unless the circumstances in Note 1 below apply.
Patent incomeReduced rate of CT, down to a minimum of 10%.
Shares held for at least 12 months in other trading companiesNo gains on disposal if at least 10% of company's share capital held.
Creative industries producing: films, high-end or children's TV programmes, video games or theatre productionsEnhanced deductions for certain expenditure and losses surrendered for payable tax credits.

Notes

  1. No deduction available for any goodwill acquired from 8.7.2015 and to goodwill on incorporation from 3.12.2014.
  2. The above is a brief summary of selected reliefs available to companies; other conditions apply in each case.

Business Tax

Cash basis1.4.20171.4.2016
Entry threshold – turnover up to:£150,000£83,000
Exit threshold – turnover not more than:£300,000£166,000

Notes

  1. Entry threshold in 2017/18 is £300,000 for Universal Credit claimants.
  2. Unincorporated trading businesses with annual turnover within the above limits can choose to calculate taxable profits on the ‘cash basis’ – income received and expenditure paid, rather than invoiced or accrued.
  3. Deduction for loan interest is limited to £500 per year.
  4. Losses can only be carried forward.
  5. Certain businesses are not permitted to use the cash basis, including: farmers using the herd basis, persons using profit averaging, and LLPs.

Flat rate deductions

Item used for businessPermitted deduction
Taxpayer's car or goods vehicleUp to 10,000 miles pa45p/mile
 Over 10,000 miles pa25p/mile
Taxpayer’s home (use per month)25 - 50 hours£10/month
 51 - 100 hours£18/month
 101 hours or more£26/month
Business premises partly used as home (e.g. public house or B&B)Private use adjustment
 1 occupant£350/month
 2 occupants£500/month
 3 occupants£650/month

Notes

  1. Unincorporated businesses can choose the above fixed rate deductions to use instead of calculating the business proportion of actual expenditure.
  2. Use of home deduction covers power, internet, telephone, but not council tax or mortgage interest.
  3. Use of vehicle does not cover finance element of lease or hire purchase costs for vehicle.
  4. Use of business premises amounts are deducted from the actual expenses of running the building so that the personal costs of resident business owners are excluded.

Capital allowances

Plant and machinery

Period of expenditure from1.4.20171.4.2016
Annual Investment Allowance£200,000£200,000
Energy/water-efficient technologies100%100%
Writing down allowance – general pool18%18%
Writing down allowance – special rate pool8%8%

Notes

  1. Neither capital expenditure nor depreciation is generally allowed as an expense.
  2. The writing down allowance spreads the cost over several years, and is not related to the accounting depreciation.
  3. Special rate pool includes long life assets, plant integral to buildings and thermal insulation.

Motor cars

CO2 emissions of vehicle (g/km)1.4.20171.4.2016
Up to 75100%100%
Up to 130 (in general pool)18% pa18% pa
Above 130 (in special rate pool)8% pa8% pa

Notes

  1. For the 100% allowance the car must be acquired new, not second hand.
  2. The 8% allowance applies to cars with emissions over 160g/km that were purchased before April 2013.
  3. Unincorporated businesses: the allowance is reduced for private use of the car.

Property Taxes

Annual Tax on Enveloped Dwellings (ATED)

Property valueAnnual charge to
 31.3.201831.3.2017
£0.5m – £1m£3,500£3,500
£1m – £2m£7,050£7,000
£2m – £5m£23,550£23,350
£5m – £10m£54,950£54,450
£10m – £20m£110,100£109,050
Over £20m£220,350£218,200

Notes

  1. The ATED applies to residential properties owned via a corporate structure, unless the property is used for a qualifying purpose.
  2. There are many reliefs that can remove or reduce the charge, but in order to claim a relief, a Relief Declaration Return must be submitted.
  3. The ATED return and tax due must generally reach HMRC by 30 April within the relevant year.

Stamp Duty Land Tax (SDLT)

Residential property

Purchase priceRate on band
Up to £125,000Nil
£125,001 - £250,0002%
£250,001 - £925,0005%
£925,001 - £1.5m10%
Over £1.5m12%

Notes

  1. From 1 April 2016, a supplement of 3% of the total purchase price applies where someone owning one or more residences acquires an additional residence for more than £40,000, unless they are replacing their main residence.
  2. Where purchaser is a company or partnership including a corporate member and price is over £500,000, SDLT is 15% of total purchase price if exemptions or reliefs do not apply.
  3. New leases with a net present value of rents exceeding £125,000 attract SDLT of 1% of that excess.

Commercial property

Purchase price for freeholdRate on band
Up to £150,000Nil
Between £150,001 and £250,0002%
Over £250,0005%

Net present value of rent for leaseRate on band
Up to £150,000Nil
Between £150,001 and £5m1%
Over £5m2%

Land and Buildings Transaction Tax (LBTT)

Residential property

Purchase priceRate on band
Up to £145,000Nil
£145,001 - £250,0002%
£250,001 - £325,0005%
£325,001 - £750,00010%
Over £750,00012%

Notes

  1. In Scotland LBTT replaced SDLT for purchases from 1 April 2015.
  2. From 1 April 2016, a supplement of 3% of the total purchase price applies where someone owning one or more residences acquires an additional residence for more than £40,000, unless they are replacing their main residence.

Commercial property

Purchase priceRate on band
Up to £150,000Nil
£150,001 - £350,0003%
Over £350,0004.5%

Notes

  1. The above rates of LBTT also apply to any lease premium on commercial properties.
  2. Leases with an NPV of rents exceeding £150,000 attract LBTT of 1%.

Value Added Tax

VAT rates

 VAT rateVAT fraction
Standard rate20%1/6
Lower or reduced rate5%1/21
Zero rate0%-

Notes

  1. Lower rate applies to a small range of supplies, including domestic fuel and power and some conversions of residential property.
  2. Zero rate applies to a range of supplies, including most food, hard-copy books and newspapers (not electronic), new houses and children's clothes. VAT is charged at a zero rate to the customer, but the supplier can recover VAT on costs.
  3. Exempt supplies include many land-related supplies, insurance, finance, education, health and welfare, and non-profit sports clubs. No VAT is charged to the customer, but the supplier can’t recover VAT on costs.

VAT thresholds

From1.4.20171.4.2016
Registration – turnover for last 12 months£85,000£83,000
Deregistration – turnover next 12 months£83,000£81,000

Notes

  1. An unregistered business must register for VAT if it has made taxable supplies that equal or exceed the registration threshold in the last 12 months, up to any month-end, or if it expects to exceed that threshold in the next 30 days alone. Taxable supplies include reduced rate and zero-rated sales.
  2. A VAT-registered business can apply to deregister if it can satisfy HMRC that taxable supplies in the next year will not exceed the deregistration threshold.
  3. Most VAT returns are prepared for three-month periods, and must be filed electronically within seven days of the end of the month following the return period.
  4. Payment of VAT must be made electronically, and must be received by HMRC by the same deadline as the return or be paid by direct debit.
  5. If you supply automated digital or broadcasting services to nonbusinesses in other EU countries, you must charge VAT at the rate that applies where the customer belongs. The overseas VAT must be charged on any amount of sales, even if you are not VAT-registered in the UK.
  6. To charge overseas VAT you must either register for VAT in the customer’s country or register through HMRC’s VAT-MOSS system.

Small business schemes

Annual turnoverJoiningLeaving
Flat-rate scheme (FRS)£150,000£230,000
Annual accounting£1,350,000£1,600,000
Cash accounting£1,350,000£1,600,000

Notes

  1. When using FRS, the VAT paid to HMRC by the business is a fixed percentage (based on business category) of ‘FRS turnover’ rather than the net of output tax over input tax.
  2. Businesses in first year of VAT registration are entitled to a 1% discount on the normal FRS percentage for their business category.
  3. Under FRS, input VAT is not recoverable, unless it relates to the purchase of a capital asset costing £2,000 or more (including VAT).
  4. From 1 April 2017, the FRS includes a new business category ('limited cost trader'). These are businesses that spend less than 2% of their turnover, or less than £1,000 per year, on goods (excluding, principally, capital goods, food for own or employees’ consumption, and vehicles and fuel, unless a transport business). Such businesses may find being in the scheme is no longer worthwhile.
  5. Under annual accounting the business files a single VAT return each year instead of one every three months.
  6. When using the cash accounting scheme, the business only pays VAT to HMRC when its customers have paid the business, but it can only recover VAT on expenses actually paid for, rather than accrued.

Inheritance Tax (IHT)

Rates and thresholds from2017/182016/17
Nil Rate Band (NRB)£325,000£325,000
Residential enhancement (RNRB)£100,000N/A
Tax paid on legacies on death40%40%
Tax paid if at least 10% of net estate
is left to charity on death
36%36%
Gifts made up to seven years before
death (see lifetime gifts)
40%40%
Chargeable lifetime transfers to trusts20%20%

Notes

  1. RNRB is available for transfers of a main residence (or assets of an equivalent value if the main residence has been sold) to direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m
  2. Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB may be claimed to increment the current NRB and RNRB when the survivor dies.
  3. Gifts or legacies to charities are not charged to IHT.
  4. IHT due on a deceased’s estate and on gifts within seven years of death is generally due six months after the month of death, but in practice it must be paid before probate is granted.
  5. If the donor pays the IHT due on a chargeable lifetime transfer to a trust, the effective rate is 25%.
  6. IHT on chargeable lifetime transfers to trusts is payable within 6 months from the end of the month of transfer

Lifetime gifts

Reduced tax charge on gifts up to seven years before death
Years before death0-33-44-55-66-7
Percentage of IHT
death charge payable
100%80%60%40%20%

Note

Lifetime gifts between individuals ('potentially exempt transfers') are only charged to IHT if the donor dies within seven years of the gift.

Exempt gifts

Amount of reliefConditions
£3,000 paAmount per donor; unused exemption can can be carried forward one year
£250 paDe minimis amount per recipient
UnlimitedRegular gifts out of surplus income
UnlimitedTo UK domiciled spouse or civil partner
£325,000To non-domiciled spouse/civil partner
£5,000From parent of party to marriage (see note)
£2,500From a grandparent (or remoter ancestor) of a party to a marriage, or from one party of a marriage to the other (see note)
£1,000From any other person to a party to a marriage (see note)

Note

Exemptions for gifts on marriage apply also to civil partnerships.

Business and agricultural property

Amount of reliefProperty and conditions
100%All shareholdings in unquoted trading companies; an unincorporated business or interest in such a business
50%Controlling shareholding in quoted company; land and buildings used by either a trading company controlled by the owner, or a partnership where he is a partner
100%Agricultural value of qualifying farmland and buildings

Note

In all cases the property must have been owned for at least two years, and other conditions apply.

Trusts

Tax rates2017/18
Type of trustLife interestDiscretionary
Rate on dividend income7.5%38.1%
Rate on other income20%45%
CGT rate on residential property28%28%
CGT rate on other gains20%20%
CGT annual exemption£5,650£5,650

Notes

  1. Trustees are liable to Income Tax on the trust income, CGT on the trust gains and, in some circumstances, IHT.
  2. Discretionary trusts pay tax at 7.5% or 20% on income used to pay trust expenses and on another £1,000 of income, before paying at the main rates (38.1% or 45%).
  3. Discretionary trusts for vulnerable beneficiaries (such as disabled people) may reduce their effective tax rates if an election is made.
  4. The CGT annual exemption is divided between trusts established by the same settlor since 6.6.1978, to a minimum of £1,130.
  5. Trustees are liable to pay IHT in a variety of circumstances; appropriate professional advice is essential.
  6. Beneficiaries of life interest trusts (‘liferent’ trusts in Scotland) are treated as entitled to the income of the trustees, and pay tax on it in the year it arises to the trust, with a credit for tax paid by the trustees.
  7. Beneficiaries of discretionary trusts pay tax on income distributed to them by the trustees, which is treated as paid with a tax credit of 9/11 of the cash received (i.e. a £45 tax credit for every £55 of income distributed).

Key deadlines

Payment deadlines

Self assessment2017/182016/17
1st payment on account31 January20182017
2nd payment on account31 July20182017
Balancing payment31 January20192018
Capital Gains Tax31 January20192018
National insurance
Class 1A NIC19 July20182017
Class 1B NIC19 October20182017

Notes

  1. Payments on account for 2017/18 are based on 2016/17 self assessed Income Tax and Class 4 NIC.
  2. Non-residents with gains on UK residential property must pay CGT within 30 days of disposal, unless already filing a self assessment tax return.
  3. Missing any payment dates leads to interest being charged at 3%.
  4. Missing the balancing payment date by 30 days will lead to a 5% penalty.
  5. When the balancing payment is six and12 months late, further 5% penalties apply on each occasion.
  6. Employment income is charged to both Income Tax and to Class 1 NIC.
  7. Tax and NIC are normally paid by the employer through the PAYE system, under which the PAYE code makes adjustments for tax reliefs due and some tax due on other income.
  8. Where a payment date is the 19th of the month, any cheque must reach HMRC by that date, or the business day preceding it (if the 19th falls on a week-end or Bank Holiday). Online payments can reach HMRC by 22nd of the month without incurring interest.
  9. An employee who has overpaid or underpaid tax at the end of the year will normally receive a tax calculation from HMRC on form P800 and shortly afterwards receive a tax repayment, or be asked to pay any tax due.
  10. If the tax underpaid is no more than £3,000, the underpayment can be settled through PAYE in the following tax year.

Filing deadlines

For tax year2016/17
Issue P60s to employees31 May 2017
P11D and P11D(b)6 July 2017
Paper version of self-assessment return31 October 2017
Online self-assessment return31 January 2018

Notes

  1. Where taxpayers submit the 2016/17 self assessment tax return by 30 December 2017, they can request that underpaid tax, within limits, is collected through PAYE code in the following tax year.
  2. A late filing penalty of £100 will be issued if the self assessment return is not submitted within the deadlines indicated above. This applies even if no tax is due.
  3. Further late filing penalties are due if the self assessment return is more than three, six and 12 months late.

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