2017 rates and allowances

Published: 07 Mar 2018

Updated: 13 Mar 2018

Written by Ray Coman

Basic State Pension

 Corporation Tax

Between 1 April 2014 and 31 March 2015, the effective rate of corporation tax on total profits increased from 20% to 21.25% on a sliding scale where profits were between £300,000 and £1,500,000. While this created a hybrid rate of between 20% and 21.25%, the marginal rate was higher than 21.25%. For instance, tax payable on profits of £500,000 would be 21%. However, for every extra pound earned above £300,000, 21.25 pence in tax would be payable.

To calculate corporation tax between the small profits rate and main rate, firstly take the amount of tax at the main rate on profits, calculate the difference between the upper limit for marginal relief and profits, and apply the marginal relief fraction to this difference. The result of this step is deducted from tax at the main rate on profits to arrive at corporation tax payable.

An alternative method of calculation is to apply the small profits rate to the first £300,000 and the marginal rate on the surplus.

Since dividends have suffered corporation tax at source, they are assessed to income tax with a tax credit. To the extent that the dividends are within the basic rate band there is no further tax to pay. To the extent dividend increase total income into higher rate of tax there is an effective 25% payable on the gross amount. The tax credit is not repayable. Therefore, if dividends received are less than the personal allowance, the amount of tax credit would not be repaid.

 Capital Gains Tax

Individual Savings Account 

 VAT

Stamp Duties

Mileage Allowance

Enterprise Investment Scheme and Venture Capital Trusts

Income tax relief limits effective 2014/15 are as follows:

Research and Development Tax Relief

EU definition of small and medium sized companies for R&D tax relief purposes

Advisory Fuel Rates

From 1 March 2016

National Insurance Contributions 

Thresholds for Class 1 National Insurance Contributions (NICs)

Class 1 NIC rate on earnings

Prior to 2016/17 it was possible for an employee to contract out of the additional state pension, and pay into an approved private pension instead.  However, contracting out is no longer possible from 2016/17, since the additional state pension has been discontinued.

Class 1(A) NICs

National insurance is payable by employers on most taxable benefits. There is no lower limit. Taxable benefits are not generally subject to employee's national insurance contributions, although certain readily convertible assets, such as listed shares, are subject to employee's national insurance contributions.

National insurance on Self-employment

Class 2 NICs

Class 2 national insurance is payable by sole traders and partners in a partnership. If profits are below the small profits limit then it is possible to be excepted from liability to Class 2 NICs. The accrual of social security will be affected if no class 2 liability is paid for a particular year.

 Class 4 NICs

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 will not count towards state benefits, until Class 2 NICs are abolished.

Class 3 NICs

A person can top up national insurance by making voluntary contributions.  This would be suitable for a non-resident who does not have sufficient qualifying years towards a state pension.

Income Tax

Rates of income tax on dividends

Personal allowances

From 2016/17, there are no longer any age -related allowances.

Inheritance Tax

Taper relief

There is no inheritance tax on a gift which is made more than seven years after a person's death. Where a person dies between three and seven years after making a gift, the full rate of tax is reduce at a rate of 20% per year, as the following table illustrates:

Quick succession relief

Where a person dies within five years of receiving property (whether by a lifetime or death gift) on which inheritance tax has already been paid, the tax due on the estate is reduced by quick succession relief. The inheritance tax liability is calculated as: Tax paid on first transfer × value after tax/value before tax × percentage in the table below

Pension Rates

Car Benefit Charge 

Van benefit charge

Fuel Benefit charge

Capital Allowances

Rate of the annual investment allowance

Annual investment allowance limit

Capital allowances for cars

 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.