2016 rates and allowances

Published: 17 Mar 2016

 

Written by Ray Coman

 

The following is a list of the main rates and allowance for the year to 2015-16 with comparative information for the preceding 2014-15 tax year.

 

Basic state pension

 

  2015-16

 

2014-15

 

 

Weekly        

Annual                Weekly        Annual             
Single person £115.95 £6,029.40 £113.10 £5,881.20
Spouse's/civil partner's         £69.50 £3,614.00 £67.80 £3,525.60
Total married person £185.45 £9,643.40 £180.90

£9,406.80

 

Pension credit - standard minimum guarantee

 

       
Single £151.20 £7,862.40 £148.35 £7,714.20
Couple £230.85 £12,004.20 £226.50 £11,778.00

 

There are two elements to the state pension. The basic state pension is paid at a flat rate depending on the number of qualifying years that you have a national insurance credit.  A person who has accured accrued 30 qualifying years between school leaving age and retirement age would be entitled to the full, basic state pension.  Pensioners with fewer than 30 qualifying years, would be entitled to a reduced basic pension.  A minimum of 10 years of contributions is required in order to receive any pension at all.  An additional pension is payable if you have higher earnings.

 

Individuals who are married but do not qualify for a pension would be entitled to the spouse's pension.  This could occur where a person has not made sufficient years of contributions.  A married person who qualifies for a full pension would be entitled to the same as a single person.

 

Broadly, pension credit is a means tested benefit and only payable if income is below the above thresholds. The payment will top up income until it reaches the above threshold. For a married person, the income for both partners is tested, and a credit is paid to the extent that combined income is below the threshold above. Pension credit is payable to individuals who are older than the state pension age. Unlike state pension, the pension credit is non-taxable.

 

Capital gains tax

 

  2015-16 2014-15
Standard rate 18% 18%
Higher rate 28% 28%
Entrepreneurs' relief - effective rate 10% 10%
Entrepreneurs' relief £10 mil. £10 mil.

Annual exemption

   

Individual

 £11,100 £11,000
settlement(s) (spread over total number)  £5,550 £5,500

Chattels exemption

   
(proceeds per item or set)  £6,000  £6,000
Marginal relief  5/3 Excess over £6,000  5/3 Excess over £6,000

 

Individual Savings Accounts

 

Written by Ray Coman

Individual savings accounts (ISAs)          2015-16 From 1 July 2015
Overall investment limit £15,240 £15,000
Junior ISA  £4,080 £4,000

 

A husband or wife can inherit the ISA of their deceased spouse effective from 6 April 2015 for any spouse that has passed away since 3 December 2014.

 

Stamp duty

 

The system of stamp duty calculation was altered in December 2014. To prevent confusion, the current and preceding stamp duty rates are shown in separate tables.

Residential property Since 4 December 2014
Up to £125,000 Zero
Over £125,000 to £250,000 2%
Over £250,000 to £925,000 5%
Over £925,000 to £1.5 million 10%
Over £1.5 million 12%
Over £500,000 (companies) 15%

As an example, for a property sold at £1 million, the calculation is:

0% on the first £125,000
2% on the next £125,000 (or 2,500)
5% on the next £675,000 (33,750)
10% on the remaining 75,000 (or £7,500)
The total SDLT would therefore be £43,750.

This compares with the system pre- 4 December 2014 where stamp duty was charged at a fixed rate. Using the table below SDLT on consideration of £1 million would have been £40,000, i.e. a straight 4%.

The fixed rate calculation continues to apply for non-residential and mixed use properties.

Residential property Up to 3 December 2014 2013-14
Up to £125,000 Zero Zero
Over £125,000 to £250,000 1% 1%
Over £250,000 to £500,000 3% 3%
Over £500,000 (companies) 15% n/a
Over £500,000 to £1 million 4% 4%
Over £1 million to £2 million 5% 5%
Over £2 million (individuals) 7% 7%
Over £2 million (companies) n/a 15%

 

Where a lease is granted, SDLT is charged on both lease premium and on the net present value of the rental. Lease premiums and net rental values are assessed separately for determining the SDLT band into which a transaction falls. 

The 7% and 15% rates were introduced for property transactions from 22 March 2012.  The lower threshold for companies took effect from 20 March 2014, after the 2014 Budget announcement.

 

Research and development tax relief

 

 

Relief for qualifying revenue expenditure is as follows:

 

  From 1 April 2012  Before 1 April 2012
Small & medium sized companies 225% 175%
Large companies 130% 130%

 

National Insurance Contributions on Employment

 

Thresholds for Class 1 National Insurance Contributions (NICs)

 

  2015-16 2014-15
Thresholds Annual Monthly Weekly Annual Monthly Weekly
Lower earnings limit £5,824  £485  £112  £5,772 £481 £111
Primary earnings threshold £8,060 £671 £155  £7,956 £663 £153
Secondary earnings threshold  £8,112 £676  £156  £7,956 £663 £153
Upper accruals point £40,040 £3,337 £770 £40,040 £3,337 £770
Upper earnings limit £42,380 £3,531 £815 £42,380 £3,531 £815

 

A taxpayer requires a number of qualifying years (currently 30 years) to secure entitlement to the basic state pension.  A year of earnings above the lower earnings limit will add a year towards the minimum number required to secure a basic state pension.

An additional state pension (or SP2) is based on the amount of national insurance contributions a person has paid, but unlike the basic state pension, it is not a fixed amount.  Earnings above the upper accruals point will not increase entitlement to additional state pension.

 

Class 1 NIC rate on earnings

 

  2015-16 2014-15
  Employee Employer Employee Employer
Between primary threshold and upper earnings limit 12% 13.8% 12% 13.8%
Above upper earnings limit 2% 13.8% 2% 13.8%
Contracted out rebate 1.4% 3.4% 1.4% 3.4%

 

It is possible for an employee to contract out of the additional state pension, and pay into an approved private pension instead.  An employer is required to contribute and amount at least equal to the reduced national insurance into the private pension.  From 6 April 2012, a person cannot contract out of additional state pension by having a private pension, but only by joining an occupational scheme.

 

In a contracted out employment, the rebate will apply to earnings between the lower earnings limit and upper accrual point.

 

The additional state pension is sometimes referred to as the State Second Pension (or S2P)

 

Class 1(A) NICs

 

  2015-16 2014-15
Rate 13.8% 13.8%

 

National insurance on Self-employment

Class 2 NICs

 

  2015-16 2014-15
  Weekly Yearly Weekly Yearly
Flat rate £2.80 £145.60 £2.75 £143.00
Small earnings exception limit   £5,965   £5,885

 

In the 2014 budget, the chancellor announced that Class 2 will be abolished from April 2016.

 

Class 4 NICs

 

  2015-16 2014-15
  Profit band Rate Profit band Rate
Between lower profits and upper profits limit £8,060 to £42,385 9% £7,956 to £41,865 9%
Above upper profits limit   2%   2%

 

Self-employed individuals are liable to class 4 national insurance contributions in addition to class 2 NICs and income tax. Class 4 national insurance contributions do not count towards state benefits. Therefore a self-employed person would not accrue any additional state pension by paying more class 4 NICs.

 

Class 3 NICs

 

  2015-16 2014-15
  Weekly Yearly Weekly Yearly
Flat rate £14.10 £733.20 £13.90 £722.80

 

Rates of income tax

 

Rate

2015-16

2014-15

Starting rate: 10%/0%*

£0 to £5,000

£0 to £2,880

Basic rate: 20%

£0 to £31,785

£0 to £31,865

Higher rate: 40%

£31,786 to £150,000

£32,866 to £150,000

Top rate: 45%

Over £150,000

Over £150,000

In the 2014 Budget, the govenment announecd that the 10% rate will be replaced by a 0% rate from April 2015.

 

Rates of income tax on dividends

 

Rate

2015-16

2014-15

Basic rate: 0%

£0 to £31,785

£0 to £31,865

Higher rate: 25%

£31,785 to £150,000

£31,865 to £150,000

Top rate: 30.5%

Over £150,000

Over £150,000

 

Dividends are taxed as the top slice of income, after savings and non-savings income. Dividends come with a non-refundable 10% tax credit. The basic rate of tax on dividends is 10%, however this is indicated as 0% in the table above, on account of the neutralising effect of the tax credit. To the extent that non-dividend income is less than the personal allowance, any tax credits on dividends are not repaid.

 

To the extent that dividends increase total income into higher rates of tax there is a further 25% income tax to pay. This increases to 30.5% for dividends which fall into the additional rate of tax.

 

Personal allowances

 

Income Tax allowances

2015-16

2014-15

Personal Allowance (basic)

£10,600

£10,000

Income limit for Personal Allowance

£100,000

£100,000

Personal Allowance for people born between 6 April 1938 and 5 April 1948

£10,600

£10,500

Personal Allowance for people before 6 April 1938

£10,660

£10,660

Income limit for the allowances for those born before 6 April 1948

£27,700

£27,000

Married Couple's Allowance (born before 6th April 1935)

£8,355

£8,165

Minimum amount of Married Couple's Allowance

£3,220

£3,140

Blind Person's Allowance

£2,290

£2,230

 

The basic personal allowance is available to UK taxpayers born after 5 April 1948 (for 2013-14.)

 

Age related allowances

 

The personal allowance is higher for people aged 65-74 at the some point in the tax year.  If a person is aged 75 at the start of the tax year (i.e. on 6 April), the highest personal allowance is available.  A person who dies in a tax year in which they would have reached 65 or 75 is provided with the respective age related allowance.

 

To the extent that income limit for age-related allowances exceed the adjusted net income limit above, the allowance is withdrawn.  The age related allowance is withdrawn at a rate of one pound for every two pounds that income exceeds the age related allowance above.  For this purpose ‘net adjusted income is after deduction of gift aid and pension contributions.  The age related allowance is withdrawn until it reaches the level of the personal allowance.  There is no further withdrawal of the personal allowance until income exceeds £100,000.

 

Married couple’s allowance

 

If the older spouse is born before 6 April 1935, the husband or higher earning spouse is entitled to a married couple’s allowance.  For couples married after 5 December 2005 the tax reduction is allocated to whichever partner has the higher income.

 

The maximum allowance is reduced by half of the excess of income over the income limit (i.e. £26,100 for 2013-14), as already reduced by age allowance.  In other words, any surplus of income after the age related allowance has been fully abated will reduce the married couple allowance.  However, the allowance cannot be reduced below the minimum shown above. 

 

A taxpayer is entitled to a reduction in tax liability equal to 10% of the amount of married couple’s allowance.  However the tax reducer cannot create a tax refund.  For instance, the minimum tax reduction for 2015-16 is 10% of £3,220, or £322.

 

If it turns out that any allowance is wasted, because the husband (or higher earning partner) does not have sufficient tax liability to extinguish, the surplus may be transferred to other partner.

 

The allowance is reduced by a twelfth for each part month or full month in which the couple have not been married in the tax year of marriage.  In the year of separation or death, the husband is entitled to a full year of the allowance.

 

From April 2015, spouses can transfer personal allowance of up to £1,060, where neither spouse is a higher rate taxpayer.

 

Pension rates

 

 

 

2015-16 2014-15

Lifetime Allowance

£1,250,000 £1,250,000

Annual Allowance

£40,000 £40,000

Lifetime Allowance Charge

55% on excess paid as a lump sum.   25% on excess not taken as a lump sum. 55% on excess paid as a lump sum.   25% on excess not taken as a lump sum.

Annual Allowance Charge

20%-45%, depending on other income 20%-45%, depending on other income

Maximum pension contribution with tax relief

100% of relevant UK earnings or £3,600, (subject to the annual allowance) 100% of relevant UK earnings or £3,600, (subject to the annual allowance)

 

Car benefit charge

 

Co2 Emissions g/km Petrol Engine % Diesel Engines %
50 or less 5 8
51-75 9 12
76-94 13 16
95-99 14 17
100-104 15 18
105-109 16 19
110-114 17 20
115-119 18 21
120-124 19 22
125-129 20 23
130-134 21 24
135-139 22 25
140-144 23 26
145-149 24 27
150-154 25 28
155-159 26 29
160-164 27 30
165-169 28 31
170-174 29 32
175-179 30 33
180-184 31 34
185-189 32 35
190-194 33 36
195-199 34 37
200-204 35 37
205-209 36 37
210 g/kg and above 37 37

 

Van benefit charge

 

 

  2015-16 2014-15
Van benefit charge £3,150 £3,090

 

 

Fuel Benefit charge

 

  2015-16 2014-15
Car Fuel Benefit Charge Multiplier £22,100 £21,700
Van Fuel Benefit Charge Multiplier £594 £581

 

Changes to car benefit charges from 2015-16

 

The lower threshold for CO2 emissions reduces to 110 g/km from 115 g/km in 2013-14. The appropriate percentage charge will increase by 1% up to a maximum of 37% for all vehicles with co2 emissions of 210 g/km.  The lowest percentage has increased from 0% to 9% from 2015-16. This measure creates a taxable benefit for the provision of electric cars and other vehicles with zero CO2 emissions. Preferential rates for cars with co2 emissions below 75 g/km have been abolished.

 

 

Rate of the annual investment allowance

 

 

 

From 1 April 2014 to 31 December 2015 2013/14
Annual investment allowance 100% 100%
Main rate on general pool 18% 18%
Special rate pool 8% 8%
Know-how and patents 25% 25%

 

 

Annual investment allowance limit

 

 

 

From 1 April 2014 to 31 December 2015 2013/14
Annual investment allowance £500,000 £250,000

 

 

The annual investment allowance was due to increase to £250,000 for a temporary period of two years from 1 January 2013. The increase will take effect from 6 April 2014 (rather than 1 April) for unincorporated businesses. The AIA will reduce to £25,000 from 1 January 2016.

 

Capital allowances for cars

 

 

 

2015-16 2014/15
CO2 emissions below 75 g/km 100%  
CO2 emissions below 95 g/km n/a 100%
CO2 emissions between 75 g/km and 130 g/km 18%  
CO2 emissions between 95 g/km and 130 g/km   18%
CO2 emissions over 130 g/km 8% 8%

 

 

The main pool rate applies to a car with CO2 emissions below 130 g/km, and the special rate applies to car with a higher CO2 emissions. Up to 31 March 2018, car with low emissions, such as those which are electrically propelled will qualify for 100% capital allowance.

 

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