Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

The MoneySaving Forum: join to chat & swap tips with other MoneySavers. Learn how in the Forum Introduction Guide

Tax Rates 2017/18

Break down what the taxman gets

Get Our Free Money Tips Email!

For all the latest deals, guides and loopholes - join the 12m who get it. Don't miss out

Helen S

Updated April 2017

Tax rates

Nothing's as certain as death and taxes. Yet while there's no doubt we'll all be taxed, the rates can change rapidly. Will you pay 20% or will you end up in the 40% tax bracket?

This is an updated guide for the tax year starting 6 April 2017 - use it together with the Income Tax Checker tool.

What's my personal allowance?

Don't get squashed by the tax man

Each of us has a 'personal allowance', which denotes the amount we can earn without paying any income tax. If you earn more than your personal allowance, then you pay tax at the applicable rate on all earnings above the personal allowance, but the allowance remains untaxed.

What's my 2017/18 personal allowance?
Age Earning bracket 2017/18 personal allowance
Any age Under £100,000 £11,500
£100,000 to £123,000 Decreases from £11,500 by £1 for every £2 you earn, until it reaches £0
Over £123,000 £0
Extra allowances
Are you blind?
Your personal allowance + £2,320

Are you married or in a civil partnership?

If the answer to that is yes and both partners were born on or after 6 April 1935 then you may be entitled to the Marriage tax allowance which allows couples to transfer a proportion of their personal allowance between them.

Alternatively, if at least one partner was born before 6 April 1935, then you can get a different married couples' allowance, which, despite its name, is also available to civil partners.

10% of this allowance is then subtracted from your annual income tax. If you were married before 5 December 2005, it is automatically worked out using the husband's salary. For couples married on or after 5 December 2005, it uses the highest earner's salary.

Born 6 April 1935 or before? - married couples' allowance 2017/18
Salary 2017/18 married couples' allowance
Under £28,000 £8,445
Between £28,000 and £38,370 Decreases from £8,445, by £1 for every £2 you earn until it reaches £3,260
Over £38,370 £3,260
Once you know your allowance, work out 10% of it. You will receive this amount in tax relief.

What income tax band am I in?

Once you know your personal allowance, anything extra earned will be subject to income tax. For the 2017/18 tax year, there are three marginal income tax bands, including the 40% tax bracket and the 45% 'additional rate' bracket (also remember your personal allowance starts to shrink once earnings hit £100,000).

If you live in Scotland, the higher rate income tax threshold is frozen at last year's levels for the 2017/18 tax year.

What is my income tax rate 2017/18?
Earnings (if you live in England, Wales or Northern Ireland) 2017/18 rate
Under your personal allowance (PA)
For most, £11,500
No income tax payable
Between PA and PA+£33,500
For most, £11,500 to £45,000
20%
Between PA+£33,500 and £150,000
For most, £45,000 to £150,000
40%
Over £150,000 45%
What is my income tax rate 2017/18?
Earnings (if you live in Scotland) 2017/18 rate
Under your personal allowance (PA)
For most, £11,500
No income tax payable
Between PA and PA+£31,500
For most, £11,500 to £43,000
20%
Between PA+£31,500 and £150,000
For most, £43,000 to £150,000
40%
Over £150,000 45%

Marginal bands mean you only pay the specified tax rate on that portion of salary. For instance, if your salary puts you in the 40% tax bracket (over PA+£33,500 in 2017/18), then you only pay 40% tax on the segment of earnings in that income tax band. For the lower part of your earnings, you'll still pay the appropriate 20% or 0%.

Other tax-free allowances

Since April 2016, your savings interest has been paid to you tax-free, and the personal savings allowance (PSA) has come into play. The PSA means every basic-rate taxpayer can earn £1,000 interest per year without paying tax on it. Higher rate payers get a £500 allowance, and additional raters don't get an allowance.

If you're a low earner, there's another tax-free allowance you get called the starting savings rate. This enables you to earn another £5,000/yr in savings interest tax-free if you earn less than £11,000/yr. For every pound you earn above this threshold, you lose a pound of savings allowance. For more on this see the tax-free savings guide.

What's national insurance?

In addition to plain old income tax, most UK workers also have national insurance contributions deducted from their pay. These kick in based on your earnings from the age of 16, and you usually stop paying when you reach state pension age.

What's my national insurance rate 2017/18?
Earnings National insurance rate 2017/18 (For employed, NOT self-employed)
Per week Annual salary
Under £157 Under £8,164 No national insurance payable
£157 - £866 £8,164 - £45,000 12% on everything earned between £157-£866/week
Over £866 Over £45,000 12% on everything earned between £157-£866/week, 2% on everything above that
Some advanced national insurance rules are very complicated. See the HMRC website for full rates.

What if I'm self-employed?

The national insurance rules if you're self-employed are more complicated than those for employees. Until April 2018, you usually pay two sorts of national insurance contributions (NICs) - class 2 and class 4. From April 2018, only class 4 NICs will be payable - and chancellor Philip Hammond recently scrapped a proposed increase in these.

NICs are paid on profits you make, which are calculated by deducting your expenses from your self-employment income, above a certain threshold. Most self-employed people pay national insurance through self-assessment.

What are my class 2 NICs 2017/18?
Profits (per year) Class 2 NIC rate 2017/18 (For self-employed, NOT employed)
Under £6,025 No national insurance payable
Over £6,025 £2.85 per week
Some advanced national insurance rules are very complicated. See the HMRC website for full rates.
What are my class 4 NICs 2017/18?
Profits (per year) Class 4 NIC rate 2017/18 (For self-employed, NOT employed)
Under £8,164 No national insurance payable
£8,164 - £45,000 9% on everything earned between £157-£865/week
Over £45,000 9% on everything earned between £157-£865/week, 2% on everything above that
Some advanced national insurance rules are very complicated. See the HMRC website for full rates.

Voluntary national insurance contributions

If you have gaps in your national insurance record, for example because you earned less than the NI threshold or were living abroad, it could mean that you don't qualify for the full state pension.

If you want to fill these gaps, you may be able to pay voluntary class 3 NICs - and can usually fill gaps for the past 6 tax years. For more information see our state pensions guide.

What are my class 3 NICs 2017/18?
Rate per week Rate per year
£14.25 £741
Some advanced national insurance rules are very complicated. See the HMRC website for full rates.

Capital gains tax

Capital gains is the least common tax on income, and for many it won't apply. However, if you sell or give away an asset worth more than £6,000, you could have to pay CGT. It doesn't apply for main homes, cars or lottery/pools winnings, among other things.

Each year, individuals have an annual exemption amount that allows them to receive some gains tax-free. Above this, you pay capital gains tax on all gains.

Capital gains tax in 2017/18
Annual exemption amount £11,300 for individuals
Standard capital gains tax rate 18% on residential property, 10% on other assets
Higher capital gains tax rate 28% on residential property, 20% on other assets
Your rate of capital gains tax will depend on your other taxable income. See the HMRC website for more on how to work this out.

Dividend tax

There are two ways you make money from investing. One is when the shares increase in value and then you reap a nice little profit when you sell them. The other is when they pay dividends.

Dividends are a bit like interest on a savings account. If a company makes a profit, it gives some of it back to you - it could be on a regular basis or as a one-off. And just as you have a personal savings allowance for interest on savings, you also have a dividends allowance each tax year where the first £5,000 you receive is tax free.

Any dividends received above this allowance will be taxed at the rates shown below, unless your shares are held in a stocks & shares ISA:

Dividend tax 2017/18
Tax bracket 2017/18 rate
Basic-rate 7.5%
Higher-rate 32.5%
Additional-rate 38.1%
You won't pay any tax on the first £5,000 you receive in dividends.

If you earn more than £5,000 per year in dividend income outside of a stocks & shares ISA you'll need to inform HMRC.

Paying into a pension?

Pension payments get very complex indeed, yet the basic thing to remember is that most people don't have to pay tax on the money they pay into their pension via their employer's PAYE system. Instead, the tax relief is used to top up your pension contributions.

Nest egg

If you aren't a taxpayer, then you'll be given an extra £20 for every £80 you pay into a pension up until you've contributed £2,880. This means the Government tops up your pension to £3,600.

However, there are some limits on the amount of tax-free contributions you can make (both in a year and over your lifetime).

Pension contribution limits 2016/17 & 2017/18
Annual tax-free contribution limit £40,000 £40,000
Lifetime tax-free allowance £1,000,000 £1,000,000

Note that if you have an annual income of over £150,000 this annual allowance will be reduced (in 2017/18).

If you use the new pension freedoms to access your pension pot, then your annual allowance will drop to £10,000 for that year.

Get Our Free Money Tips Email!

For all the latest deals, guides and loopholes - join the 12m who get it. Don't miss out