And if you’re looking to get on the property ladder over the next 12 months, do you know how much you’ll have to pay in stamp duty?
If not, our at-a-glance guide to the 2016/17 tax allowances has the answers to these and many more tax-related questions…
What is income tax?
Income tax is simply a tax that is paid on money you earn.
You are entitled to earn a certain amount each year before you start paying income tax on your earnings, and the amount you pay is dependent upon the amount you earn.
The main allowances are listed below. Full details are available here.
Income tax – main personal allowances
|Aged under 65*||£10,600||£11,000||+£400|
|Those born between April 6, 1938 and April 5, 1948*||£10,600||£11,000||+£400|
|Those born before April 6, 1938*||£10,660||£11,000||+£340|
|Married couple's allowance (maximum)1||£8,335||£8,335||£0|
|Married couple's allowance (maximum)2||£3,220||£3,220||£0|
|Blind person’s allowance||£2,290||£2,290||£0|
*From 2016-17 onwards, all individuals will be entitled to the same personal allowance, regardless date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit.
1. Married couple's allowance available to people born before April 6, 1935. Tax relief for this allowance is restricted to 10%.
This allowance is reduced when the individual’s income is above the income limit. This is at a rate of £1 for every £2 above the income limit until it reaches the minimum amount. Any reduction in the married couple’s allowance applies after any reduction to the individual’s personal allowance.
2. This is also the maximum relief for maintenance payments where at least one of the parties is born before 6 April 1935.
The Marriage Allowance entitles a spouse or civil partner to transfer up to £1,100 of their personal allowance to their partner, potential knocking £220 off their tax bill (tax at 20% is saved on the amount of allowance transferred).
Income – taxable bands (figures quoted do not include the personal allowance of £11,000)
|Basic rate 20%||£0 - £31,785||£0 - £32, 000|
|Higher rate 40%||£31,786 - £150,000||£32,001 - £150,000|
|Additional rate 45%||Over £150,000||Over £150,000|
What is National Insurance?
National Insurance contributions are compulsory payments made by both employees and employers to provide state assistance for those who are sick, unemployed, or retired.
National Insurance Contributions – lower earnings limit (below which not paid)
The self-employed are required to start paying NICs once annual profits reach £5,885. Voluntary Class 2 contributions may be made below this amount.
What is an ISA?
An individual savings account (ISA) is a tax-free savings account that allows you to keep every penny of interest you make without having to pay a penny in income tax.
An ISA does come with an annual limit though, and this generally increases every tax year.
|Until April 5, 2016||From April 6, 2016||Change|
|Junior ISA allowance||£4,080||£4,080||£0|
|Child Trust Fund (CTF) subscription limit||£4,080||£4,080||£0|
|Personal allowance||Up to £325,000||Up to £325,000||£0|
|Couple's allowance||Up to £650,000||Up to £650,000||£0|
Capital gains tax allowance
Pension scheme – personal allowance
|Lifetme allowance||£1.25 million||£1.25 million||£0|
|£1.25 million||£1.25 million||£0|
|£1.25 million||£1.25 million||£0|
The lifetime allowance for pension savings was reduced by £300,000 from £1.8million to £1.5million on April 6, 2012. This was cut to £1.25million as of April 6, 2014
For any pension scheme members who have already built up savings in excess of £1.25 million, or have planned to do so as they were unaware that the lifetime allowance would not reduce from the current level, there will be a new form of protection called 'fixed protection'. For more information, click here.
What is stamp duty?
Stamp duty, or stamp duty land tax (SDLT) to give it its full name, is a tax paid on the cost of a property. The rate you pay depends upon the purchase price of the property.
Stamp duty land tax (SDLT) – residential
|Property price||Current SDLT rate (still applies if living there)||SDLT rate from April 2016 (for second homes/Buy-to-let investments)|
|On the first £40,000||Zero||Zero|
|On the next £85,000 (up to £125,000)||Zero||3%|
|On the next £125,000 (up to £250,000)||2%||5%|
|On the next £675,000 (up to £975,000)||5%||8%|
|On the next £575,000 (up to £1.5 million)||10%||13%|
|On the rest (above £1.5 million)||12%||15%|
Stamp duty land tax (SDLT) – non-residential
|Property value||SDLT rate|
|Up to £150,000||Zero|
|The next £100,000 (the portion from £150,001 to £250,000)||2%|
|The remaining amount (the portion about £250,000)||5%|
If, for example, you buy a non-residential, freehold commercial property worth £275,000, the amount of stamp duty (SDLT) you pay would be calculated as follows:
- 0% on the first £150,000 = £0
- 2% on the next £100,000 = £2,000
- 5% on the final £25,000 = £1,250
- Total SDLT = £3,250
Disadvantaged Areas relief was abolished for transactions with an effective date on or after April 6, 2013. For more details, click here.
HM Revenue and Customs (HMRC) has SDLT calculators SDLT calculators you can use to work out how much to pay.
SDLT has not applied in Scotland since April 1, 2015. Instead you’ll pay Land and Buildings Transaction Tax when you buy a property.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.