Personal Allowances

The personal allowance increases to £11,500 for the 2017/18 tax year. As for 2016/17, the allowance will be reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that anyone with income in excess of £123,000 for 2017/18 will not receive the personal allowance.

Income tax rates and bands

For 2017/18 the basic rate of tax remains at 20%, the higher rate at 40% and the additional rate at 45%. The basic rate applies to the first £33,500 of taxable income, the higher rate applies to the next £116,500 (taxable income between £33,501 and £150,000) and the additional rate applies to taxable income in excess of £150,000.

New allowances for trading and property

From 6 April 2017, new allowances are introduced for trading and property income. The allowances are both set at £1,000. Where trading income is below £1,000, the income does not need to be declared to HMRC. Where trading income exceeds £1,000, the trader has the option of deducting £1,000 rather than actual expenses in arriving at his or her taxable profit.

Likewise, where property income is less than £1,000, this will no longer need to be reported to HMRC. Where property income exceeds £1,000, the taxpayer has the choice of deducting either £1,000 or actual expenses in computing his or her profit.

Dividend tax rates

For 2017/18 the dividend tax rates remain unchanged. Dividends are taxed at the dividend ordinary rate of 7.5% to the extent that they fall within the basic rate band, at the dividend upper rate of 32.5% to the extent that they fall within the higher rate band and at the dividend additional rate of 38.1% to the extent that they fall within the additional rate band. The dividend allowance remains at £5,000. Dividends covered by the allowance are taxed at a zero rate.

Corporation tax rate falls

The rate of corporation tax is reduced to 19% for the tax financial year 2017, starting on 1 April 2017.