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Income Tax rates and bands

The team of specialist Income Tax accountants at Franklin Underwood are on hand to assess your requirements and offer you all the advice you need regarding your Income Tax rates, arrangements and payments.

Main Allowances

Allowed at top rate of tax 2016/17 2015/16
Personal Allowance (PA) £11,000 £10,600
Blind Person's Allowance 2,290 2,290
Dividend Tax Allowance (DTA) 5,000 N/A
Personal Savings Allowance (PSA)
Basic rate taxpayer)

Higher rate taxpayer 500 N/A

*PA will be withdrawn at £1 for every £2 by which 'adjusted income' exceeds £100,000. There will therefore be no allowance given if adjusted income is £122,000 or more (2015/16: £121,200).

Up to 10% of the PA (2016/17: £1,100; 2015/16: £1,060) can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer.

he DTA taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply – see rates below. PSA operates as a nil rate band for interest income.

Rate bands

2016/17 2015/16
Basic rate band (BRB) £32,000 £31,786
Higher rate band (HRB) 32,001-150,000 31,786-150,000
Additional rate over 150,000 over 150,000

BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

Tax rates

Rates differ for General/Savings/Dividend income

2016/17 2015/16
Basic rate 20% 20% 7.5% 20% 20% 10%
Higher rate 40% 40% 32.5% 40% 40% 32.5%
Additional 45% 45% 38.1% 45% 45% 37.5%

General income (salary, pensions, business profits, rent) uses personal allowance, basic rate and higher rate bands before savings income (interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%. The PSA (see allowances above) will tax interest at nil, where it would otherwise be taxable at 20% or 40%.

Dividends are taxed as the 'top slice' of income. For 2016/17, the dividend received is taxable. In 2015/16, the dividend received was grossed up by 100/90 to determine the taxable dividend. A non-repayable tax credit equal to 10% of the taxable amount was then deductible against the income tax liability on the taxable dividend.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Remittance basis charge

For non-UK domiciled individuals who have been UK resident in at least:

2016/17 2015/16
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 years 90,000 90,000