Category Archives: Tax Allowances

Capital Gains Tax 2018/19

Capital Gains Tax Allowance 2018/19This is a summary of the Capital Gains Tax Allowance for 2018/19.

Capital Gains Tax (CGT) is payable when you sell something and make a profit on it as well as when you give something away that would otherwise be included in CGT.

Some things are not liable for CGT however and you should check the rules with HMRC for your individual circumstances.

The amount of CGT that is due depends on the profit you make (i.e. the amount you sell it for less the amount you paid for it) and is only payable if it exceeds the CGT allowance for the tax year in which you make the gain.

The CGT Allowance for 2018/19 is £11,700.

This amount has been increased from 2017/18 when the rate was £11,300.

Examples of when Capital Gains Tax is due could be:

  • On the sale of a second property
  • On the disposal of personal assets that are worth more than £6,000 (although this does not include your car)
  • On the sale of shares (that are not held in an ISA)

Obviously if your profits from selling these types of goods/assets is below the allowance then no tax is payable.

Apply Online for the Marriage Allowance

We have written in the past about the relatively new Marriage Allowance that was introduced so that married couples or those in a civil partnership are able to transfer part of their personal allowance.

The Marriage Allowance can be transferred from one half of the couple that is not using their full personal allowance to the other half who would be able to make use of it at the basic rate of tax.

You can apply for the Marriage Allowance online and to do this you will need some details relating to yourself and your partner. You can check out all the information here.

You can also backdate it to 5th April 2015 if you were eligible for it in previous tax years but have not yet claimed it.

Once you have applied for it, you will continue to have the Marriage Allowance transferred to your partner until you let HMRC know that you are no longer eligible or your circumstances change.

The person who receives the extra allowance will either get it through their tax return or as a change to their tax code, but it can take a few months for it to be processed. Don’t worry though, as it will be backdated to the start of the tax year.

Tax Allowances for 2017/18

With the new tax year approaching rapidly we thought it was worth having a summary of the new UK tax allowances as they will stand for 2017/18.

You can always find a summary of allowances here together with links to further information and clarification on certain allowances, but otherwise here they are in summary:

Personal Allowance (amount of earnings you can have tax free) – £11,500

ISA Allowance (amount available to invest over all types of ISA) – £20,000

Capital Gains Tax Allowance (amount of gains allowed before tax is due) – £11,300

Inheritance Tax Allowance (amount that can be inherited tax free, including property) – £425,000

Personal Savings Allowance (amount of savings income that is tax free) – £1,000/£500

Property Allowance (amount that can be earned by small property related deals) – £1,000

Trading Allowance (amount that can be earned tax free from minor trading) – £1,000

Rent a Room Allowance (amount that can be earned tax free from renting out a room in your home) – £7,500

Not all of these allowances apply to everybody so you should check that they apply to you before using this information for your personal tax affairs.

Is the Personal Savings Allowance Increasing in 2017/18?

The personal savings allowance was introduced in April 2016 and it meant that 95% of people no longer had to pay any tax on their savings.

Anyone who was in the 20% or the 40% tax brackets was entitled to a personal allowance of either £1000 or £500 respectively. Those in the highest tax bracket were not entitled to any personal tax allowance.

The figures given are the amount of interest that savers could earn before they would have to pay any tax on that interest. The figures were set for the initial tax year of the allowance which was 2016/17.

But if you are looking to see if the personal savings allowance is increasing for the new tax year 2017/18 then the answer is no, the allowances will remain at the figures of £1,000 for basic rate tax payers and £500 for higher rate tax payers.

With interest rates as low as they currently are this means that savers would need to have a significant amount of savings before they actually need to pay any tax on the income received from those savings.

In addition to the personal savings allowance there is also the £,5000 dividend allowance which means that savers will not have to pay any interest on the first £5,000 of dividend income that they receive.

Minor Trading Allowances 2017/18

In the tax year 2017/18 the government will be introducing a new UK tax allowance for minor trading and property activity.

The allowance for each category is £1,000 and this means that individuals (who the government classes as self-starters) who have earnings under these two categories can earn up to the allowance and not pay tax on those earnings.

The allowances are also available to those people who earn more than £1,000 in each category, in which case those people will be able to earn the first £1,000 tax free.

The allowance is aimed at the entrepreneurial people in today’s society who aim to make some extra money on the side by doing things like renting out their driveway or selling goods on eBay.

The allowance could also include people who make money buying and selling at car boot sales
The allowance could also include people who make money buying and selling at car boot sales

But it is not just limited to these activities and could include for example people making and selling cakes in their spare time or those who make money buying and selling items at car boot sales. It could also cover people who rent out their garage or perhaps some land and those people who do some paid gardening or DIY work at weekends.

Anyone whose earnings are less than £1,000 a year in these categories will not need to fill in a tax return to declare any of this income but people earning over £1,000 will need to declare those earnings and deduct the £1,000 allowance from the income which would be taxable.

Another prime example would be people who use AirBnB to rent out rooms in their house (but not those who use the rent a room allowance to claim tax relief).

Both reliefs are available so if you have earnings in both categories you can claim up to £2,000 in these additional allowances.

 

 

UK Personal Allowance 2017/18

*Update* – this was increased in the 2016 Budget to £11,500

The UK personal allowance is the amount that you are allowed to earn before you are subject to tax. You can also add on to this the personal savings allowance and the dividend allowance that could be applicable to some of your earnings.

So if you are wondering what is the UK personal allowance for the tax year 2017/18 then the figure you are looking for is £11,200.

This is an increase of £200 on the personal allowance from 2016/17 – equivalent to 1.8%.

There were previously other lower figures announced for 2017/18 (which you can still find reference to on the HMRC website which can make it confusing), but when the personal allowance was increased to £11,000 for 2016/17 this was a jump higher than had previously been announced and so figures beyond 2017 also needed to be amended.

Of course there is a small chance that this could be changed in the 2016 budget but it looks unlikely at this stage.

 

What is the 40% Tax Limit in 2016?

What salary do I have to earn to get caught by 40% tax?

Generally each year the amount that you can earn before having to pay higher rate tax (which is currently charged at the rate of 40%) is increased by the government and 2016/17 is no different.

In 2015/16 there was a personal allowance of £10,600 and an allowance of £31,785 which was charged at the basic rate of 20% so in effect you could earn £42,385 before you fell into the 40% tax bracket.

In 2016/17 both the personal allowance and the 20% tax band have been increased to £11,000 and £32,000 respectively so that (assuming you are entitled to the full personal allowance), you could earn up to £43,000 before having to pay any tax at 40%.

Of course it is possible that you may have a different personal allowance or you may have to take into account other earnings or benefits in kind that may take you over the threshold.

However, one benefit in 2016/17 is that you now have a personal savings allowance of £1,000 if you are in the lower rate tax bracket or £500 if you are in the higher rate tax bracket so you will not need to pay tax on savings interest under this amount.

The increase from £42,385 to £43,000 is effectively a 1.45% increase so it is quite possible that if you were close to the threshold in 2015/16 and you have had an increase in your income, that you may now get caught in the 40% tax bracket.

Personal Savings Allowance 2016/17

With effect from April 2016 the government have introduced a personal savings allowance that means that the majority of people will not have to pay tax on their interest from savings.

This is a new allowance which is in addition to the £5,000 allowance for low earners that was introduced in 2015.

For those whose earnings are in the 20% tax bracket, there is a £1,000 savings interest allowance – so you can earn £1,000 in interest on your savings without paying any tax on that interest.

In order to have savings where some part of the interest is taxable it is likely that you would need to have over £50,000 in savings – and this is worked out on a 2% interest rate which may not always be achieved.

For those whose earnings put them in the higher rate tax bracket (i.e. those who earn over £43,000 but below £150,000) there is a reduced personal savings allowance of £500.

Anyone in the additional rate tax bracket will not be entitled to any personal savings allowance.

Because these new rules mean that 95% of people will no longer pay tax on their savings, the tax will no longer be deducted at source from savings interest as it has been in previous years. Therefore there is no need to notify your bank or building society to ask them not to take tax off your interest.

 

Do High Earners Get a Personal Allowance?

If you are a high earner then you may be questioning do high earners get a personal allowance? Well the answer really depends on what you class as a high earner as there are different answers depending on how much you earn.

You may be entitled to some or all of the personal allowance, which is the amount of earnings that is not subject to any tax.

A lot of people define high earners as those people who earn enough to pay higher rate tax so we wills tart with them. Anyone who earns enough to pay higher rate tax but who does not earn over £100,000 a year is entitled to the full personal allowance for that tax year.

However, once your earnings go above £100,000 for the tax year, the personal allowance starts to get taken away. It is reduced by £1 for every £2 of earnings above £100,000. So for example, if the personal allowance is £11,000 then anyone earning over £122,000 would not be entitled to any personal allowance and all of their earnings would be taxable.

If your earnings are £105,000 then you will only be entitled to £8,500 of personal allowance. This is calculated by dividing the excess earnings over £100,000 by 2 (5000/2 = 2500) and deducting that from the full personal allowance.

Earnings include any kind of benefits in kind as well as your salary but if you are in any doubt you should contact your accountant or HM Revenue for clarification.

Do Pensioners Get a Higher Personal Allowance?

If you are over 65 do you get a higher personal allowance? This is a question which many pensioners may wonder about as they have heard that this might be the case.

Unfortunately the current answer to this is only a small amount, only if you are over 75 and only if you earn under a certain amount.

In the past both those over 65 and those over 75 were entitled to a higher tax free allowance than those who were under 65. However, those extra allowances have been phased out coinciding with the increase in the personal allowance for everybody. The last part of that phase is happening this year (2015/16) whereby those over 75 at 6 April are entitled to a personal allowance of £10,660 rather than the standard personal allowance of £10,600.

However, if you are in that category and have earnings in excess of £27,700 (and earnings means things like pension income), then your extra amount of personal allowance is reduced by £1 for every £2 of income you receive over this amount, to the minimal level of £10,600.

From 2016/17 onwards there will only be a single personal allowance rate for all ages and that will be £10,800 for 2016/17.