2. Income tax savings in 2016-17
The major tax rates and thresholds for 2016-17 are as follows:
|Starting rate for £5,000 savings income||0%||0%|
|Dividend ordinary rate – for basic rate taxpayers||10%||7.5%*|
|Dividend upper rate – for higher rate taxpayers||32.5%||32.5%*|
|Dividend additional rate – for 45% taxpayers||37.5%||38.1%*|
|Basic rate band||£0-31,785||£0-32,000|
|Higher rate band||£31,786-£150,000||£32,001-150,000|
|Additional rate band||Over £150,000||Over £150,000|
*if above the dividend allowance – see below.
The Income tax allowances for 2016-17 are:
|Income limit for personal allowance||£100,000|
|Blind person’s allowance||£2,290|
|*New* dividend allowance||£5,000|
|*New* personal savings allowance for basic rate taxpayers||£1,000|
|*New* personal savings allowance for higher rate taxpayers||£500|
There are two important things to note:
- As mentioned in the last newsletter, the taxation of dividends is changing and you will get a new £5,000 tax-free dividend allowance. Any dividends above that are taxed, even if you are a basic rate taxpayer.
- A new personal savings allowance is being introduced (unless you are a 45% taxpayer) and you will get up to £1,000 tax-free savings interest (£500 for higher rate taxpayers). All interest payments will then be made without deduction of tax.
This means that you could pay less tax on your savings and investments. Get in touch and we can check this for you. This is especially important if you have stocks and shares or UK equity income funds.
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