Income tax and personal savings

The new income tax rates / personal allowances plus changes to savings and pensions.

Income tax

  2018/19 2017/18
Basic rate band - income up to ***£34,500 ***£33,500
Starting rate for savings income *0% *0%
Basic rate 20% 20%
Dividend ordinary rate **7.5% **7.5%
Higher rate - income between ***£34,501 - £150,000 ***£33,501 - £150,000
Higher rate 40% 40%
Dividend upper rate **32.5% **32.5%
Additional rate - income over £150,000 £150,000
Additional rate 45% 45%
Dividend additional rate **38.1% **38.1%
Starting rate limit (savings income) *£5,000 *£5,000

*If an individual's taxable non-savings income exceeds starting rate limit, then starting rate limit for savings will not be available for savings income. £1,000 of savings income for basic rate taxpayers (£500 higher rate) may be tax-free.

**The tax-free dividend allowance is set to reduce from £5,000 to £2,000 from 6 April 2018.

***For Scottish taxpayers only the limit for 2017/18 is £31,500. The Scottish government is set to introduce further changes to the income tax rates and bands for Scottish taxpayers for 2018/19.

Personal allowances

  2018/19 2017/18
Personal Allowance (PA) £11,850 £11,500
Married couple’s allowance (MCA) (relief given at 10%)
Either partner born before 6 April 1935 *£8,695 *£8,445
Transferable Tax Allowance ('Marriage Allowance')
For certain married couples (relief given at 20%) £1,185 £1,150

*Allowances are reduced by £1 for every £2 that adjusted net income exceeds £28,900 (2017/18 £28,000) to a minimum MCA of £3,360 (2017/18 £3,260). Where adjusted net income exceeds £100,000 (2017/18 £100,000), PA is reduced in the same way until it is nil regardless of the individual's date of birth.

Marriage Allowance: allowing claims on behalf of deceased partners

The government will legislate to allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be backdated for up to four years where the entitlement conditions are met. The changes will have effect on and after 29 November 2017.

Investment tax reliefs

  2018/19 2017/18
Venture Capital Trust up to £200,000 £200,000
Enterprise Investment Scheme up to* £1,000,000 £1,000,000
Seed Enterprise Investment Scheme up to £100,000 £100,000
Social Investment Tax Relief up to £1,000,000 £1,000,000

*For 2018/19 the annual limit is increased to £2m, provided that anything above £1m is invested in knowledge-intensive companies.

Individual Savings Accounts (ISAs)

Individuals can invest in any combination of cash or stocks and shares up to the overall annual ISA subscription limit. However, a saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA, one Innovative Finance ISA and one Lifetime ISA.

The Lifetime ISA, which came into effect on 6 April 2017, is available to adults aged between 18 and 40 to save towards retirement or for a first home in the UK worth up to £450,000. Those eligible can deposit up to £4,000 each tax year and will receive a 25% bonus from the government on savings put into the account before their 50th birthday. Various rules and restrictions apply.

The ISA subscription limit for 2018/19 will remain unchanged at £20,000, of which £4,000 can be saved into a Lifetime ISA.

The annual subscription limit for Junior ISAs and Child Trust Funds for the tax year 2018/19 will be uprated in line with CPI from £4,128 to £4,260.

Pensions Lifetime Allowance (LTA)

The LTA represents the maximum amount that an individual can save into their pension pot and still benefit from tax relief at their marginal rate.

The LTA will increase in line with CPI, rising to £1,030,000 for the tax year 2018/19.


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