Income tax rates are becoming more complicated as various rates are payable on different types of income.
In 2016-17 earnings from employment, pensions or trading are taxed at 20% (the basic rate) up to £32,000, after your personal allowance has been deducted. Taxable earnings above £32,000 less than £150,000 are taxed at 40% (the higher rate). Taxable earnings in excess of £150,000 are taxed at 45% (the additional rate). The higher rate threshold will rise to £45,000 in 2017-18.
The first £5,000 of dividends you receive in 2016-17 are taxed at a zero rate. Any additional dividends are taxed at 7.5% when received by basic rate taxpayers, 32.5% for high-er rate taxpayers and 38.1% for additional rate taxpayers.
Investors who receive their income as interest, rather than as salary, dividends or profits, can take advantage of the £5,000 savings band in which interest is taxed at zero. In addition basic rate taxpayers can receive a further £1,000 of interest taxed at zero. Higher rate tax-payers can receive only £500 of interest taxed at zero. Taxpayers with income over £150,000 must pay tax at 45% on all interest they receive which is not paid out of a tax-free account such as an ISA.
Personal tax is now so compli-cated the amounts due can’t be worked out with a pencil and paper. We can advise you about your likely tax liabilities.
