Income Tax Overview

Income tax rates 1 2016/17 2015/16
  Starting rate limit (savings income) 2 *£5,000 *£5,000
  Starting rate 2 *0% *0%
Basic rate band - income up to £32,000 £31,785
  Basic rate 20% 20%
  Dividend ordinary rate, otherwise taxable at basic rate ***7.5% 10% (0%**)
Higher rate - income over £32,000 £31,785
  Higher rate 40% 40%
  Dividend upper rate, otherwise taxable at higher rate ***32.5% 32.5% (25%**)
Additional rate - income over £150,000 £150,000
  Additional rate 45% 45%
  Dividend additional rate, otherwise taxable at additional rate ***38.1% 37.5%
(30.6%**)

For 2016/17 Scottish taxpayers are effectively subject to the same income tax rates as the rest of the UK.

* If an individual's taxable non-savings income exceeds the starting rate limit, then the starting rate will not be available for savings income

For 2016/17, £1,000 of savings income for basic rate taxpayers (£500 for higher rate) may be tax-free.

** Effective rate with tax credit

*** For 2016/17 the first £5,000 of dividends are tax-free

Personal allowance (PA)    
Born after 5 April 1938 3 £11,000 £10,600
Born before 6 April 1938 4 £11,000 £10,660
Income limit for PA 3 £100,000 £100,000
Income limit for PA (Born before 6 April 1938) 4 £27,700 £27,700
Blind person's allowance   £2,290 £2,290
Married couple's allowance (MCA)    
Either partner born before 6 April 1935 (relief restricted to 10%) 5 £8,355 £8,355
Transferable tax allowance ('Marriage Allowance')    
For certain married couples and civil partners born after 5 April 1935 (relief 20%) 6 £1,100 £1,060
Tax Shelters    
Venture Capital Trust (VCT) up to £200,000 £200,000
Enterprise Investment Scheme (EIS) up to £1,000,000 £1,000,000
Seed Enterprise Investment Scheme up to £100,000 £100,000
Social Investment Tax Relief £1,000,000 £1,000,000
Golden Handshake max. £30,000 £30,000

Notes

  1. From 2016/17 onwards, all individuals will be entitled to the same personal allowance, regardless of the individual’s date of birth.
  2. If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income.
  3. The personal allowance, including the minimum age-related allowance, is reduced by £1 for every £2 that adjusted net income exceeds £100,000, regardless of the individual’s date of birth.
  4. Personal allowances for those born before 5 April 1938 are reduced by £1 for each £2 of excess income over £27,700 until the basic allowance is reached.
  5. Similar limits apply to the married couple's allowance. The reduction in allowance is subject to a minimum level of £3,220. (For couples married before 5 December 2005, only the husband's income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
  6. Available to spouses/civil partners born after 5 April 1935. The allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction at 20% of the transferred amount.