The following tax facts should be viewed as an indication of the rates and allowances available and relate to the current tax year (2018/2019) unless stated otherwise. Tax law is notoriously complex and we cannot replicate every rule, nuance or exemption here. Therefore you should not make, or refrain from making, any decisions based on this information alone. If you are in any doubt as to the suitable course of action we recommend you seek tax advice. Remember tax rules can change and depend on your personal circumstances. Information believed to be correct as at 06/04/2018.
Income tax allowances and bands
Please note it is taxable income which applies in this assessment, including earnings, pensions in payment, cash interest, fixed interest income, dividends and rent. ISA income is not included.
Income tax – main personal allowances
|Transferable tax allowance for married couples/civil partners||£1,190|
|Personal Savings Allowance (PSA)||£1,000 for Basic rate taxpayers
£500 for Higher rate taxpayers
Not available for Additional rate taxpayers
A Married Couple’s allowance (born pre 6/4/35) or Blind Person’s allowance may also apply.
The transferrable tax allowance only applies where neither individual is a higher or additional rate tax payer. The maximum tax reduction available is £238.
The personal allowance reduces by £1 for every £2 of income above £100,000. The personal allowance is lost if taxable income exceeds £123,700 (2018/19).
The dividend and personal savings allowance apply after the personal allowance and are calculated using UK, not Scottish, rates. Anything within these allowances still count towards the basic and/or higher rate tax bands.
Income tax – bands (after any personal allowance)
UK excluding Scottish Earned or Pension Income
|Rate||Tax Band||Income tax rate||Dividend tax rate|
|Starting Rate for Savings||£0 – £5,000||0%||N/A|
|Basic rate||£0 – £34,500||20%||7.5%|
|Higher Rate||£34,501 – £150,000||40%||32.5%|
Higher rate threshold (standard personal allowance + basic rate band) is £46,350.
Non-savings income uses up the starting rate for savings.
Scottish tax bands only apply to earned or pension income. They do not apply to savings or dividend income.
|Rate||Tax Band||Income tax rate|
|Starter Rate||£1 – £2,000||19%|
|Basic rate||£2,001 – £12,150||20%|
|Intermediate Rate||£12,151 – £31,580||21%|
|Higher Rate||£31,581 – £150,000||41%|
Higher rate threshold (Standard personal allowance + basic rate band) is £43,430.
Non-savings income uses up the starting rate for savings.
Capital gains tax (CGT)
CGT is charged on any profits (the ‘gains’) you make when you sell (or transfer) shares and unit trusts or other assets such as a second home. If the total of any gains realised in the year, minus any losses, exceeds your annual allowance the excess is liable to CGT.
CGT has a different tax rate depending upon whether it applies to business assets or non-business assets.
Annual capital gains tax allowance: £11,700 2018/19
2018/19 Capital gains tax rates (non-business assets)
|Capital gains||Tax rate|
|Gains which when added to taxable income fall in the UK basic rate tax band||10%|
|Gains which when added to taxable income fall in the UK higher or UK additional rate tax band||20%|
Capital gains on residential property which is not a main residence will be taxed at 18% and 28% instead of 10% and 20%.
Entrepreneurs’ Relief (Business assets)
Business assets are generally a share (or interest) in the company or firm you work for. Entrepreneurs’ Relief is subject to meeting certain criteria – PLEASE VISIT THE HMRC WEBSITE FOR MORE INFORMATION
Inheritance tax (IHT)
Announced IHT rates until 2020/21
|Value of estate||Tax rate|
|£1 – £325,000 (known as IHT threshold or nil rate band)||0%|
|Tax year||Residence nil rate band|
Stamp duty reserve tax (SDRT)
0.5% rounded up to the nearest penny when you buy shares that settled via electronic paperless system.
Standard stamp duty
When you buy shares worth over £1,000 that settle via a paper system the tax charge is 0.5% rounded up to the nearest penny. There is no charge if the shares are worth less than £1,000.
Stamp duty land tax (SDLT) – residential
Charged when you buy residential land or property.
|Purchase price or value||Tax rate paid on portion of purchase price||Tax rate paid on second and subsequent houses|
|Up to £125,000||0%||3%|
|£125,001 to £250,000||2%||5%|
|£250,001 to £925,000||5%||8%|
|£925,001 to £1,500,000||10%||13%|
Please note Stamp duty land tax (SDLT) is not charged in Scotland. A Land and Buildings Transaction tax (LBTT) will be applied instead.
|Income tax rate (above £1,000 per annum)||45%|
|Capital gains tax allowance||£5,850|
|Capital gains tax rate||20% / 28% for residential property|
|Inheritance tax (transfers into discretionary trusts)||20%|
|Dividend tax rate (up to £1,000 per annum)||7.5%|
|Dividend tax rate (above £1,000 per annum)||38.1%|
State Pension age
Historically the State Pension age was 60 for women and 65 for men. This has changed.
By November 2018 the State Pension age for women will have increased to 65. By October 2020 it will have increased to 66 for both men and women.
The State Pension age is due to increase to 67 between 2026 and 2028 and to 68 between 2044 and 2046, however the government has announced that the increase towards 68 will be brought forward to include those born on or after 6 April 1970.
Basic State Pension rate
For those who reached State Pension age before 6 April 2016, the maximum in 2018/19 is £125.95 per week.
In addition, there may be entitlement to earnings related State Second Pension (S2P) formerly State Earnings Related Pension Scheme (SERPS).
You needed 30 qualifying years for a full basic State Pension. A qualifying year is one where either sufficient national insurance was paid or was deemed to have been paid.
New State Pension rate
For those who reached State Pension age on or after 6 April 2016, the maximum in 2018/19 is £164.35 per week.
This figure will be reduced for those who have contracted out of the State Second Pension (S2P), formerly State Earnings Related Pension Scheme (SERPS), before 6 April 2016.
35 qualifying years are needed to receive the full New State Pension. A qualifying year is one where either sufficient national insurance has been paid (on earnings above a lower limit of £6,032 for this tax year) or deemed to have been paid.
Transitional rules apply for those who accrued State Pension before 6 April 2016.
Tax relief on pension contributions
|Tax status||Tax relief 2017/18*||Net cost of £1,000 gross contribution 2018/19|
|Non-taxpayer (including children) and Scottish Starter rate||20%||£800|
|Scottish intermediate rate||21%*||£790|
|Scottish higher rate||41%*||£590|
|Scottish additional rate||46%*||£540|
|Basic rate taxpayer||20%||£800|
|Higher rate taxpayer||40%*||£600|
|Additional rate taxpayer||45%*||£550|
* Any tax relief above basic rate is restricted to the amount of tax paid at that rate. This assumes no other taxable income.
Pension contribution limits
|Relevant UK earnings (usually earnings from employment or self-employment)||Maximum personal or employee contribution for tax relief|
|£0 – £3,600||£3,600|
|£3,601 and over||100% of earnings|
Annual allowance: £40,000. A £4,000 money purchase annual allowance will apply for those who have flexibly accessed their pensions.
Tapered annual allowance: If your threshold income is over £110,000 then your annual allowance will be reduced by £1 for every £2 that your adjusted income is over £150,000; to a minimum annual allowance of £10,000.
Threshold income is, broadly, all taxable income plus salary sacrificed for pension contributions on or after 9 July 2015 minus personal or employee (not via salary sacrifice) pension contributions.
Adjusted income is, broadly, all taxable income plus employer pension contributions (including via salary sacrifice) plus some benefit accrual in defined benefit, e.g. final salary, pension schemes.
Lifetime allowance: £1,030,000. If the value of pension rights exceeds the lifetime allowance on death, at retirement or at age 75, the excess could be taxed at up to 55%.
National Insurance contributions
Class 1 employed (2018/19)
|Earnings per week||Employee rate|
|£0 to £162||Nil|
|£162 to £892||12%|
|£892 and over||2%|
|Earnings per week||Employer rate|
|£0 to £162||Nil|
|£162 and over||13.8%|
National Insurance applies to most earned income or benefits in kind. National Insurance rates may be different for certain employees, e.g. if employee is over the State Pension age. No National Insurance paid by employers up to £892 for employees under 21 or apprentices under 25.
Self-employed and voluntary
|Type of National Insurance contribution||Tax rate 2018/19|
|Class 2 self-employed||£2.95 per week|
|Class 2 small profits threshold||£6,025 per annum|
|Class 3 voluntary||£14.65 per week|
|Class 4 lower profits limit||£8,424 per annum|
|Class 4 upper profits limit||£46,350 per year|
|Class 4 rate between lower profits limit and upper profits limit||9%|
|Class 4 rate above upper profits limit||2%|
For a friendly, informal, no obligation chat, feel free to contact us on: