Tax, accountancy and business support for the small and medium sized business

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2016-17 Tax Rates and Allowances

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Income Tax



Personal allowance

£11,000

The amount of income you can receive before paying tax. The allowance reduces by £1 for every £2 of income over £100,000.

Basic Rate

20%

Tax is charged at this rate on the first £32,000 (basic rate band) of income in excess of the personal allowance (PA). £1000 of savings income is tax-free.

Higher Rate

40%

Tax is charged at this rate on the next £118,000 (higher rate band) of income in excess of the basic rate band. £500 of savings income is tax-free

Additional rate

45%

Tax is charged at this rate on all income in excess of the higher rate band. All savings income is taxable.

Personal Savings Allowance

£17,000

If your total income is less than this you will pay no tax on your savings income.

Dividend allowance

£5,000

This is the total amount of dividends you can receive before paying tax.

Dividend basic rate

8%

The tax rate you are charged on dividends you receive over the dividend allowance depends on which of the above income tax bands you are in.

Dividend higher rate

33%

Dividend additional rate

38%

National Insurance


Class 1

12%

Employees pay Class 1 at this rate on their wages in excess of £155 and below £827/week.

Class 1

2%

Employees pay Class 1 at this rate on their wages in excess of £827/week.

Class 2

£2.80/wk

The self employed pay Class 2 if their income is over the Small Profits Threshold. For the self-employed Class 2 is important for benefit entitlement.

Small Profits Threshold

£5,965

Class 2 National Insurance is calculated automatically if total self-employment income exceeds the Small Profits Threshold.

Class 4

9%

The self employed pay Class 4 at this rate on their taxable profits in excess of £8,060/year and below £43,000/year. Class 4 provides no benefits.

Class 4

2%

The self employed pay Class 4 at this rate on their profits in excess of £43,000/year.

VAT


VAT registration threshold

£83,000

You must register for VAT with HM Revenue and Customs if your business’ VAT taxable turnover exceeds the registration threshold

VAT deregistration threshold

£81,000

You can ask HM Revenue and Customs to cancel your registration if your VAT taxable turnover falls below the de-registration threshold.

Standard rate

20%


Reduced rate

5%


Cash accounting joining threshold

£1,350,000


Cash accounting leaving threshold

£1,600,000


Flat rate scheme joining threshold

£150,000


Flat rate scheme leaving threshold

£230,000