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Spring Budget 2017: Rates and allowances

ICAEW Tax Faculty provides analysis of the announcements relating to tax rates and allowances in the Spring Budget 2017.

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The government has published a table of rates and allowances (Annex A to the OOTLAR).

The Tax Faculty will be publishing an updated version of our tax rates and allowance TAXguide.  

Personal allowances

The intention to increase the personal allowance to £12,500 by the end of the current parliament was confirmed. 

The personal allowance in 2016/17 is £11,000. As previously announced, this will increase to £11,500 for 2017/18.

Higher rate threshold

The intention to increase the higher rate tax threshold to £50,000 by the end of the current parliament was confirmed.

The income tax 20% basic rate band for 2016/17 is £32,000 (with a 0% starting rate band of £5,000 for savings income in certain circumstances).

As previously announced the 20% basic rate limit will increase to £33,500 for 2017/18. As a result, the higher rate threshold (ie, the personal allowance plus the basic rate band) is £43,000 in 2016/17 and will be £45,000 in 2017/18. 

Year Standard personal allowance Basic rate of 20% on income Higher rate threshold Additional rate of 45% on income over
2016/17  £11,000  £32,000 £43,000 £150,000
2017/18 £11,500
£33,500 £45,000 £150,000

* A lower higher rate threshold applies to earned income of Scottish taxpayers

Dividend allowance

The tax-free dividend allowance of £5,000 (more correctly described as a dividend nil rate band) which was introduced from April 2016 is to be reduced to £2,000 from April 2018. See the Personal and employment taxes section.

National insurance

The NIC upper earnings limit remains aligned with the higher rate threshold.

For the self-employed, class 2 NIC will be abolished from April 2018 and there will be an increase in the rate of class 4 NIC. See the Business and company tax section.

Capital gains tax

The CGT annual exemption for 2017/18 will be £11,300 (£5,650 for most trustees).

Corporation tax

The rate of corporation tax is currently 20%. As previously announced it will be reduced to 19% from April 2017 and to 17% from April 2020.

VAT

The VAT registration threshold will increase from £83,000 from April 2017. For details, see the VAT section.

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