Personal Allowances and Savings

The increase in the personal allowance to £12,500, as well as the widening of the income band charged at basic rate tax by £3,000, means that higher rate tax is now not charged until taxable income reaches £50,000 (note that rates for Scotland differ slightly). Whilst the basic rate tax band has been widened by £3,000, the higher rate tax band has been cut by the same amount, meaning that the additional tax rate of 45% still kicks in for taxable earnings over £150,000. Savings income continues to attract an additional £1,000 tax-free band for basic rate taxpayers, £500 for higher rate taxpayers and nothing for additional tax payers. In addition, there is a £5,000 nil rate band for low earners that decreases on a one-for-one basis as income exceeds the £12,500 personal allowance. The tax-free dividend allowance remains at £2,000, with the tax rate remaining at 7.5% for basic, 32.5% for higher and 38.1% for additional rate taxpayers, although the tax bands have of course changed. This clearly has an impact on investments outside of ISAs; if dividend income was a relatively healthy 5%, the equity investment would need to be worth more than £40,000 before tax becomes due.

Share this post

This website uses cookies to ensure you get the best experience on our website. View our cookie policy here

Personal Allowances and Savings

The increase in the personal allowance to £12,500, as well as the widening of the income band charged at basic rate tax by £3,000, means that higher rate tax is now not charged until taxable income reaches £50,000 (note that rates for Scotland differ slightly). Whilst the basic rate tax band has been widened by £3,000, the higher rate tax band has been cut by the same amount, meaning that the additional tax rate of 45% still kicks in for taxable earnings over £150,000. Savings income continues to attract an additional £1,000 tax-free band for basic rate taxpayers, £500 for higher rate taxpayers and nothing for additional tax payers. In addition, there is a £5,000 nil rate band for low earners that decreases on a one-for-one basis as income exceeds the £12,500 personal allowance. The tax-free dividend allowance remains at £2,000, with the tax rate remaining at 7.5% for basic, 32.5% for higher and 38.1% for additional rate taxpayers, although the tax bands have of course changed. This clearly has an impact on investments outside of ISAs; if dividend income was a relatively healthy 5%, the equity investment would need to be worth more than £40,000 before tax becomes due.