The tax-free personal allowance has been set at £11,000 for 2016-17; it will rise to £11,500 for 2017-18.
The personal allowance is set at the same level for taxpayers of all ages, although higher earners have their allowance reduced by £1 for every £2 by which income exceeds £100,000.
Individuals with income in excess of £122,000 for 2016-17 and £123,000 for 2017-18 won't receive a personal allowance. The abatement triggers an effective marginal tax rate of 60% between £100,000 and £122,000 for 2016-17. If you have income in that range, you could consider making pension contributions or Gift Aid donations to reduce your taxable income.
New allowances.
From 6 April 2017, there will be two new allowances worth £1,000 each to cover small trading profits and income from property, respectively. The aim of these allowances is to allow people to earn relatively small amounts for occasional jobs or letting property without having to worry about submitting a tax return or paying tax on that income. It is not yet clear how these allowances will interact with rent-a-room relief which provides a £7,500 allowance in 2016-17 for income from letting part of your own home as residential accommodation.
Tax rate and thresholds.
2016-17 earnings from employment, pensions and trading
- 20% (basic rate up to £32,000).(after your personal allowance has been deducted)
- 40% (higher rate £32,000 to £150,000).
- 45% (additional rate £150,000 plus).
The higher rate threshold will rise to £45,000 in 2017-18.
Dividends.
2016-17 - The first £5,000 of dividends you receive are taxed at a zero rate.
Any amount of dividends received over £5,000 - Basic rate taxpayers are taxed at 7.5%, higher rate taxpayers are taxed at 32.5% and additional rate taxpayers at 38.1%.
VAT.
The compulsory VAT registration threshold will rise to £83,000 on 1 April 2016, and the deregistration threshold will increase from £80,000 to £81,000.
A reminder that Fare Pay & Books can help with your accounting, book keeping, payroll and tax returns.
Don't hesitate to contact Katherine for an informal discussion or a no obligation quotation based on your personal needs.
Katherine Fare, FMAAT & AAT Licensed Member in Practice.
Proprietor of Fare Pay & Books (Location Preston, Lancashire).
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