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4 | Year-End Tax Guide 2017/18
TAX ON SAVINGS
The personal savings allowance allows a basic rate
taxpayer to receive up to £1,000 of savings income
tax-free, while a higher rate taxpayer can get up to £500
of savings income, without any tax being due.
There is no relief for an additional rate (45%) taxpayer.
This is the last year the £5,000 tax-free dividend allowance
(a band in which dividends are taxed at 0%) is available.
From 6 April 2018, the dividend allowance reduces to £2,000.
PLANNING
Consider using the marriage allowance if your spouse
or civil partner is not taking full advantage of their
personal allowance
Are there opportunities to utilise any unused
allowances this tax year?
What can you do to take advantage of marginal tax
rates and reduce the slice taxable at a higher rate?
Would it be possible to consider the tax-free
alternatives instead of a bonus or a salary increase?
Is your dividend strategy as tax-eficient as it could be?
Could you take advantage of the rent a room relief, which
is £7,500 for individuals, or £3,750 for joint owners?
ISAs
PERSONAL ALLOWANCES AND RELIEFS
The personal allowance for the current tax year is £11,500. Non-savings income above the personal allowance is
taxed at rates from 20% to 45%.
A higher marginal tax rate may be payable between £100,000 and £123,000 when the personal allowance is gradually
withdrawn, giving an effective marginal rate of 60% in this band for non-savings and savings income.
You may be able to transfer £1,150 of your personal allowance to your spouse or civil partner if neither of you is a
higher rate taxpayer.
Generally speaking, it is relevant when one spouse or civil partner is not able to use all of their personal allowance.
Adults can invest up to £20,000 per tax year into an ISA.
Growth, income and withdrawals from an ISA are free of
income tax and capital gains tax (CGT), but the value of
an ISA will form part of your estate for inheritance tax
(IHT) purposes.
A Junior ISA allowance of up to £4,128 is available for those
who are 17 or under.
ISAs are normally readily accessible (subject to scheme rules).
It is also possible, as part of the annual £20,000 ISA
allowance, to invest £4,000 in a Lifetime ISA which receives
an annual government bonus of up to 25% of your savings.
The funds can be used on the purchase of the irst home, or
used for retirement.
There are further scheme rules and early withdrawal penalties,
but youmust be over 18 and under 40 to open a Lifetime ISA.
Help to Buy ISAs allow individuals over the age of 16 to save
up to £200 a month towards their irst home.
Savers can also deposit a lump sum of up to £1,000 when
they set up their account.
The money will earn interest and will also qualify for a 25%
government bonus (up to £3,000), providing the funds are
used to buy a irst home.
PLANNING
If you don't already have an ISA, should you start one
this tax year?
Should you use the maximum tax-free
investment allowance?