A concise guide to the main tax rates, bands and allowances you will encounter as a contractor during the 2017/18 tax year.
All tax rates are effective from 6th April unless otherwise stated.
Capital Gains Tax
|Tax Band||2017/18 Rate||2016/17 Rate|
|Basic (Residential Property)||18%||18%|
|Higher (Residential Property)||28%||28%|
The Entrepreneurs’ Relief CGT rate remains at 10% for eligible disposals, subject to a lifetime limit of £10m. Find out more about CGT here.
Child Benefit / CB Charge
Child Benefit rates are £20.70 for the first, and £13.70 for subsequent children (unchanged from previous tax year).
If one parent earns £50,000 or more, a tax charge of 1% for every £100 earned over that threshold becomes payable at self-assessment time. So, all of the benefit is removed when income reaches £60,000. Interestingly, both parents can earn £1 under the £50,000 threshold, i.e. total earnings of £99,998, and pay no charge whatsoever.
Find out more in our guide to the child benefit tax rules.
19% – this is a flat tax rate on all company profits from 1st April 2017 (a 1% cut from the previous year).
Dividend taxation changed significantly from 1st April 2016 onwards. Find out more here.
|Tax Band||2017/18 Income||Tax Rate|
|Basic||£0 – £33,500||7.5%|
|Higher||£33,501 – £150,000||32.5%|
When working out which proportion of your dividend income falls into which tax band, it should be noted that dividends are taxed as your ‘top slice’ of income, i.e. after all of your other income has been taxed. Try our 2017-18 dividend tax calculator.
The Personal Allowance is £11,500 (was £11,000), however, this is reduced by £1 for every £2 you earn over £100,000.
The following income tax rates apply to income in excess of the Personal Allowance.
These rates apply to salaries and non-dividend income. See above for the rates which apply to dividends.
|Tax Band||2017/18 Income||2016/17 Income||Tax Rate|
|Basic||£0 – £33,500||£0 – £32,000||20%|
|Higher||£33,501 – £150,000||£32,001 – £150,000||40%|
|Additional||£150,000 +||£150,000 +||45%|
- £325,000 – no tax is payable below this threshold per person.
- 40% – flat IHT rate on the value of all estates above the nil threshold.
- From April 2017, a new additional IHT main residence nil-rate band has been created, worth £100,000 per person (where eligible) – increasing to a maximum of £175,000 by 2020/21. You can find out more here.
- You can save up to £20,000 this year in a combined cash/shares ISA (it was £15,240).
- The annual limit for both Junior ISAs and Child Trust Funds is £4,128 (it was £4,080).
NICs are payable on salaried income, and not dividends. The following rates apply:
- Employees’ NICs – 12% on salary above £8,164 (Primary Threshold), and 2% above £45,000 (Upper Earnings Limit).
- Employers’ NICs – 13.8% on salary above £8,164 (Secondary Threshold).
The ‘Employment Allowance’ will refund up to £3,000 of any Employers’ NICs your company pays during 2017/18, however, your company must be eligible.
|Category||2017/18 Rate||2016/17 Rate|
|Tapered Annual Allowance threshold||£150,000 (incl. pension contributions)||£150,000 (incl. pension contributions)|
|Money Purchase Annual Allowance||£4,000||£10,000|
If you are buying a property, the following stamp duty rates apply (on an incremental basis). However, if you are buying a second home, a 3% supplement will be levied to each relevant band in turn if the property costs £40,000 or more.
|Property Price||Stamp Duty|
|£1 – £125,000||Nil|
|£125,001 – £250,000||2%|
|£250,001 – £925,000||5%|
|£925,001 – £1.5m||10%|
Value Added Tax
- 20% – the standard rate of VAT, applied to all invoices if you are VAT registered.
- £85,000 – registration threshold (from 1st April 2017).
- £83,000 – deregistration threshold (from 1st April 2017).
- £150,000 – turnover threshold limit for the Flat Rate VAT Scheme.