Tax return done, Budget & Tax Year end to come!

01 February 2017

The 2017 calendar has cleared its first month and for most, the season of tidying up their tax affairs for their HMRC submission before the end of January is complete.

Time to relax, some might think, but the end of the tax year is fast approaching and some final financial planning is usually in order to make sure that where applicable all boxes are ticked before we reach 05 April.

Easter this year falls around the middle of April and before then we have the Spring Budget on Wednesday 08 March. As you can guess, there is usually a lot to think about and plan for in financial planning before spring is truly sprung.

As a reminder, here are a few of the annual allowances that you might want to think about for this tax year 2016/2017:

Tax Allowance / Limit

Tax Year 2016/2017

Basic Personal Income Tax Allowance

£11,000

New Tax Free Savings Interestallowance

First £1,000 tax free/Basic rate

First £500 tax free /Higher rate

ISA allowance

£15,240

Junior ISA/Child Trust Fund allowance

£4,080

Capital Gains Tax allowance

£11,100

Maximum pension contribution from all sources

£40,000 gross*

Annual gift allowance

£3,000

Nil rate Inheritance Tax band

£325,000

Premium Bond allocation (total per individual)

£50,000**

Dividend Tax Allowance

£5,000***

Income Tax

2016/2017

Starting rate of 0% income tax limit (savings income)

£5,000

Basic rate income tax band (20%)

£0 - £32,000

Higher rate income tax band (40%)

£32,001 - £150,00

Additional rate income tax band (45%)

Over £150,000

* From April 2016 the £40,000 annual allowance is reduced if you have an income of over £150,000, including pension contributions.

** This increased to £50,000 from 1 June 2015

*** This replaces the dividend tax credit.Any dividends above £5,000 but still in the basic tax band (up to £43,000 for 16/17) will be charged at 7.5% and any dividends in the higher tax band will be charged at 32.5% (also additional rates apply at the upper rate of tax).


Changes for the next tax year (2017/2018) that we certainly know about (subject to there being no surprise changes in the Spring Budget) are:

  • The ISA allowance will increase to £20,000, as expected, effective from 06 April 2017. The JISA / Child Trust Fund allowance will increase to £4,128.
  • Tax-free personal allowance to rise to £11,500 in April 2017. This is to rise further to £12,500 by the end of the current parliament, and to rise in line with inflation thereafter. The level at which individuals start paying higher rate income tax is set to rise to £50,000 by the end of the current parliament.
  • Tax savings on salary sacrifice and benefits in kind are to be stopped from April 2017, with exceptions for ultra-low emission cars, pensions, childcare and cycling. So salary sacrifice pension contributions are safe for the moment (but watch this space).
  • Insurance Premium Tax to rise from 10% to 12% from June 2017
  • A new savings bond will be launched through National Savings & Investments (NS&I). Full details will be announced when the new bond is launched in the spring – however, the rate of interest is likely to be around 2.2% pa gross AER, with a term of three years and a maximum investment of £3,000 per individual.

Pension Money Purchase Annual Allowance reduction to £4,000

There is a planned reduction in the current money purchase annual allowance (MPAA) of £10,000 gross to £4,000 gross pa from the new tax year for those who have drawn income from their money purchase pension plans. This is to avoid / reduce the potential for recycling of income back into pensions and was introduced by the new Chancellor, Phillip Hammond, in November 2016.

HMRC Individual Protection 2014

It is still possible to apply for Individual Protection 2014 if your pension benefits were worth more than £1.25 million at 05 April 2014. If eligible, you will need to apply for Individual Protection 2014 before 05 April 2017. You can apply online here (you will need a Government Gateway login and password): https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance#individual-protection-2014

We hope this blog is helpful in providing a short 'ready reckoner' of what you might want to think about over the next eight weeks or so as we reach the end of the tax year, and we can see Easter and its plans clearly in the calendar and hopefully feel some warmer weather. The team at Chapters Financial based in Guildford is ready to help you with your financial planning and no individual advice is provided during this blog.

Vicky Fulcher

Associate Director

Chapters Financial Limited