Personal Taxation 2018/19
Main personal allowances
|Personal income tax allowance (PA)||£11,850||£11,500|
|Marriage allowance (transferable)||1,190||1,150|
|Blind person’s allowance||2,390||2,320|
- PA is reduced by £1 for every £2 by which Adjusted Net Income (ANI) exceeds £100,000, so PA is nil when ANI is £123,700.
- ANI is total taxable income, less qualifying pension contributions and Gift Aid donations.
- Marriage allowance is the transferable part of the PA and is available only to married couples and civil partners born after 5 April 1935. It can be transferred to their spouse or civil partner as long as the recipient is not a higher or top rate taxpayer.
- The rent-a-room exemption is available where the taxpayer lets out part of the home they live in as furnished residential accommodation.
- Where rent-a-room, trading or property income exceed the relevant limit above, that limit (rather than expenses) may be deducted from gross income.
Income tax bands
|Savings rate band||£5,000||£5,000|
|Basic rate band (BRB)||34,500||33,500|
|Higher rate band (HRB)||34,501-150,000||33,501-150,000|
|Additional rate||over 150,000||over 150,000|
|Personal Savings Allowance (PSA)|
|– Basic rate taxpayer||1,000||1,000|
|– Higher rate taxpayer||500||500|
- The BRB (Scotland: intermediate rate band) and additional rate threshold are extended by the grossed-up equivalent of personal pension contributions and Gift Aid donations paid by the taxpayer in the tax year, or treated as paid in the tax year.
- Taxable income usually uses up the rate bands in the following order:
- G ‘general income’ (employment, pensions, business profits, rent)
- S ‘savings income’ (mainly interest)
- D ‘dividends’ (distributions from companies/most unit trusts)
- The savings rate band only applies to savings income and taxes it at a nil rate. If taxable general income (‘non-savings income’) exceeds this band, the savings rate band does not apply.
- Different bands and rates apply to general income in Scotland (see below).
Income tax rates
|2018/19 & 2017/18|
|Rates differ for:||G||S||D|
- The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%. It is not available to a top rate taxpayer.
- Dividends are usually taxed as the ‘top slice’ of income. The Dividend Allowance taxes the first £2,000 of dividend income at nil rather than the rate that would otherwise apply.
Income tax bands and rates – Scotland (2018/19)
|Top rate||over 150,000||46%|
- The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.
- In 2017/18, the Scottish rates were the same as in the rest of the UK, except that the higher rate band began at £31,501 rather than £33,501.
Remittance basis charge
|Resident in the UK for||2018/19||2017/18|
|7 of the preceding 9 tax years||£30,000||£30,000|
|12 of the preceding 14 tax years||60,000||60,000|
|15 of the preceding 20 tax years||Deemed to be UK domiciled|
- The remittance basis charge (RBC) is payable by non-UK domiciled individuals who claim the remittance basis and who have been resident in the UK for the periods shown.
|Proportion of finance costs allowable against letting income||50%||75%|
- Finance costs comprise mainly interest, but includes related matters such as arrangement fees.
- A tax reducer at 20% of the disallowed finance costs is available to reduce the landlord’s income tax liability, but is subject to certain restrictions.
- The phasing out of deductible finance costs will continue through to 2020/21, when only basic rate relief as a tax reducer will be available.
- These rules do not affect qualifying furnished holiday lets, commercial property or corporate landlords.
High Income Child Benefit charge (HICBC)
- Only applicable to families who receive child benefit, where adjusted net income of highest earner is above lower threshold.
- HICBC is equivalent to 1% of child benefit received by the family, for every £100 of adjusted net income over lower threshold.
- Highest earner in family must declare child benefit received by them or their partner on their tax return.
- The recipient of child benefit can elect not to receive it in order to avoid the HICBC, without losing their right to accrue certain state benefits. Child benefit payments can subsequently be recommenced if the claimant chooses.