Budget Summary 2016/17

Income Tax Rates and Allowances

Income Tax Rates and Allowances (Table A)

Main allowances 2016/17 2015/16
Personal Allowance*† £11,000 £10,600
Blind Person's Allowance 2,290 2,290
Allowed only at 10%
Married Couple's Allowance (born before 6.4.35)** 8,355 8,355
Income limit for age-related allowances 27,700 27,700
Dividend and Savings Allowances
Dividend Tax Allowance (DTA) § 5,000 N/A
Personal Savings Allowance (basic rate taxpayer) § 1,000 N/A
Personal Savings Allowance (higher rate taxpayer) § 500 N/A

*Personal Allowance (PA) will be withdrawn at £1 for every £2 by which 'adjusted income' exceeds £100,000. There will therefore be no allowance given if adjusted income is £122,000 or more (2015/16: £121,200).

†Up to 10% of the PA (2016/17: £1,100; 2015/16: £1,060) can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer.

**Married Couple's Allowance is reduced by £1 for every £2 by which adjusted income exceeds the income limit, down to a minimum of £3,220.

§The DTA taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply – see rates below. The Personal Savings Allowance (PSA) operates as a nil rate band for interest income.

Rate bands 2016/17 2015/16
Basic £32,000 £31,786
Higher 32,001-150,000 31,786-150,000
Additional over 150,000 over 150,000

Rates 2016/17 2015/16
Rates differ for General, Savings and Dividend income within each band:
  G S D G S D
Basic 20% 20% 7.5% 20% 20% 10%
Higher 40% 40% 32.5% 40% 40% 32.5%
Additional 45% 45% 38.1% 45% 45% 37.5%

General income (salary, pensions, business profits, rent) uses Personal Allowance, basic rate and higher rate bands before savings income (interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%. The PSA (see above) will tax interest at nil where it would otherwise be taxable at 20% or 40%.

Dividends are taxed as the 'top slice' of income. For 2016/17, the dividend received is taxable. In 2015/16, the dividend received was grossed up by 100/90 to determine the taxable dividend. A non-repayable tax credit equal to 10% of the taxable amount was then deductible against the income tax liability on the taxable dividend.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Remittance basis charge 2016/17 2015/16
For non-UK domiciled individuals who have been
UK resident in at least
7 of the preceding 9 tax years £30,000 £30,000
12 of the preceding 14 tax years 60,000 50,000
17 of the preceding 20 tax years 90,000 N/A

Registered Pensions (Table B)

  2016/17 2015/16
Lifetime allowance (LA) £1.00m £1.25m
Annual allowance (AA)* 40,000 40,000
LA charge if excess drawn as cash 55%/income 25%
AA charge on excess inputs 20%-45%

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

*For 2016/17 the AA is usually reduced by £1 for every £2 by which relevant income exceeds £150,000, down to a minimum AA of £10,000.

Car and Fuel Benefits (Table C)


Taxable benefit is chargeable value multiplied by chargeable percentage.

Chargeable value:

Initial list price of car (including most accessories), reduced by any capital contribution (maximum £5,000) by employee when the car is first made available.

Chargeable percentage:

CO2 emissions (g/km) Petrol Diesel
0-50 7% 10%
51-75 11% 14%
76-94 15% 18%
Above 94 Add 1% for every 5g/km
Above 200 (petrol)/ 185 (diesel) 37% maximum

Car Fuel

Where employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from above table multiplied by £22,200 (2015/16 £22,100).

Employee contributions for fuel do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).