Tax-free allowances in the UK

Tax-free allowance in the UK

As a matter of fact in England the taxes are not super low but human have the impression that they are actually low. For all that, tax-free allowance helps to that impression. The price is on quite high level.

In England apply many forms of tax exemption and commonly these are significant prices. Thus today I would like to present kinds of forms available for tax-free allowances.

Below is a summary of tax-free allowances (2016-2017):

  • Tax Free Salary £11,500
  • Capital Gains Tax Allowance £11,300
  • Rent a Room £7,500
  • Dividend Allowance £5,000
  • Personal Savings Allowance £1,000

It should mentioned that NIC insurance for entrepreneurs is paid from profit not from income.

I think I don’t have to mention about Income Tax rates and Personal Allowances.

Everyone knows that tax in the UK is paid from the amount higher than 115501. It turns out that when we earn 11501-45000 pounds, the chargé for taxi s 20%.

If you live in a formal attachement in the UK you need to get to know with the following article: What is Marriage Allowance to get tax exemption and more precisely, to increase the tax-free amount.

What about capital gains

Most of people don’t have idea about Capital Gain Tax. In England the tax advantage was entered into force. Its amount is 11300 pounds, if it is trust agreement – £5650.

For example: You have bought shares at little cost and you have sold it for higher price. The variance is your profit for which you must pay a tax. Here’s a little surprise. You will pay a tax only when your profit will be higher than 11300 pounds.

You have one room and you are earning some extra money by renting it

If you rent a room and you will earn less than 7500 pounds, the tax payment is not necessary. In particular, today when platforms like  airbnb, 9flats* and Homestay are becoming popular.

 Do you know what Airbnb is? Needfully read that post: Holiday Apartments and Holiday rental.

If you are a landlord the following tax-free amount not applies you.

What tax from dividend

Oczywiście to zwolnienie dotyczy każdego. In 2016 new Community legislation came into force.

Currently the tax-free Dividend Allowance is valid. It means that the first 5000 pounds is being taxed-free from dividend.

The tax rates have actually changed and they are depended on in which tax threshold you are already in. Now they are in the following form:

  • 7.5% when it comes to basic rate band
  • 32.5% when it comes to higher rate band
  • 38.1% when it comes to additional rate band

The people with low income obtained next tax-free amounts. Unfortunatelly, the other ones who make too much money are paying more.

If you want to know more about other forms of saving on taxes, needfully read this article: What is the tax-Free Childcare and refundation for washing work clothes at home?

It gets interesting if you will start a company LTD and you will pay out salary in basic tax rate and the rest salary will stay as dividend.

That is why reach people always get richer. The tax from dividend in that case is only 7.5%. If you have accountant you can save considerable amounts on tax.

Tax-free allowance in the UKIt gets interesting if you will start a company LTD and you will pay out salary in basic tax rate and the rest salary will stay as dividend. That is why reach people always get richer.

The tax from dividend in that case is only 7.5%. If you have accountant you can save considerable amounts on tax.

Reminder:

  • 0% – Personal Allowance: £11500
  • 20% – Basic Rate Limit: £45000
  • 40% – Higher Rate Threshold: £150,000

A practical example:

If you have earned 20000 pounds and you got dividend income 6000, you will pay only 7.5% from 1000 pounds. Since you’ll be in Basic Rate Limit.

I recommend to readfree guideline titled.: How to calculate and cut your Capital Gains Tax bill

I don’t know a person who take such amounts from dividend. Within a year I earn several 100 BGP.

However you will enjoy about the tax-free allowance. It is profitable for companies’ owners who earn on dividend and for pensioners who have large packages of shares.

Unfortunately the new regulations prognosis reduced aid amount from dividend’s profit from 5000 pounds to only 2000 pounds. This will be done in Fiscal Year 2018-2019.

What excatly is Personal Saving Allowance

If you have some saved money in bank for which you received percentages, you won’t pay a tax for it. It concerns also percentages from obligations.

If you’re in basic rate taxpayer, tax-free is applicable to 1000 pounds (incase of higher rate that amount is 500 pounds). If your incomes are lower than 17000 pounds, you will not pay tax. Sources:

NOTE: I present private opinions and I am not responsible for the readers’ decisions. I always try to present current information but may no longer be up to date. Therefore, before making a decision, please verify them and consult a licensed financial adviser.

Radek_new

Hey! Nazywam się Radek i na codzień ciężko pracuję w Anglii i myśl, że na emeryturę będę mógł przejść dopiero po 68 latach nie jest mi na rękę. Dlatego udowodnię, że jest to możliwe w wieku 55 lat a może i wcześniej. Zobacz na tym blogu jak chcę to osiągnąć.

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