Sarah Laing takes a timely run-through of tax rates and allowances taking effect from 6 April 2017.
The 2016 Autumn Statement confirmed that the personal allowance will be increased to £11,500 for 2017/18 (from its current level of £11,000 in 2016/17). It was also announced that the government intends to increase the allowance to £12,500 by the end of Parliament.
The basic rate limit is set to rise to £33,500 for 2017/18 (from £32,000 in 2016/17), which means that the 40% higher rate of tax will not kick in until an individual’s income reaches £45,000. The additional rate threshold, at which the 45% income tax rate is payable, will remain at £150,000 in 2017/18.
Transferring the personal allowance
Since April 2015 it has been possible for an individual, who is not liable to income tax or not liable above the basic rate for a tax year, to transfer part of their personal allowance to their spouse or civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. The transferor’s personal allowance will be reduced by the same amount.
For 2017/18, the amount that can be transferred will be £1,150, which means that the spouse or civil partner receiving the transferred allowance will be entitled to a reduced income tax liability of up to £230 for 2017/18.
One point to note here is that married couples or civil partnerships entitled to claim the married couple’s allowance are not entitled to make a transfer.
Married couple’s allowance
The married couple’s allowance may only be claimed if at least one of the parties to the marriage or civil partnership was born before 6 April 1935. The allowance is £8,355 for 2016/17 and will rise to £8,445 for 2017/18.
Blind person’s allowance
An allowance of £2,290 may be claimed in 2016/17 by a blind person, which is given in addition to the personal allowance and reduces the taxpayer’s total income. The allowance is set to rise to £2,320 for 2017/18.
Note that a married blind person who cannot use all of the relief may transfer the unused part to the other spouse (or civil partner), whether the other spouse is blind or not. A married couple, or civil partners, both of whom qualify for relief, can each claim the allowance.
The allowance can only be claimed by someone who is registered as blind (but not partially sighted). A person may register as blind even if they are not totally without sight. HMRC will, by concession, allow the relief in the previous year if evidence of blindness had already been obtained by the end of it.
Savings income
The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017/18.
The personal savings allowance (PSA), which took effect from 6 April 2016, allows basic rate taxpayers to receive up to £1,000, and higher rate taxpayers up to £500, of tax-free savings income each year. The PSA is not available for additional rate taxpayers. The allowance is available in addition to the tax advantages previously available to investors with individual savings accounts. The government has confirmed that the PSA will remain at its current level for 2017/18.
Practical Tip:
All individuals should endeavour to fully utilise personal allowances and basic rate bands wherever possible. This may seem an obvious point, but one that is surprisingly frequently missed. Unused allowances are not available to be carried forward, so it is important to ensure that they are utilised each tax year. Simple planning can be applied with care (professional advice is recommended), such as changing ownership of assets or taking up employment.
