Policy paper

Tax and tax credit rates and thresholds for 2016-17

Published 25 November 2015

1. Bands of taxable income and corresponding tax rates

  2015-16 2016-17
  % of income/£ per year  
Basic rate 20% 20%
Higher rate 40% 40%
Additional rate 45% 45%
Starting rate for savings income 1 0% 0%
Dividend ordinary rate – for dividends otherwise taxable at the basic rate (effective rate with tax credit)2 10% (0%) 7.5%
Dividend upper rate – for dividends otherwise taxable at the higher rate (effective rate with tax credit) 2 32.5% (25%) 32.5%
Dividend additional rate – for dividends otherwise taxable at the additional rate (effective rate with tax credit) 2 37.5% (30.6%) 38.1%
Starting rate limit (savings income)1 £5,000 £5,000
Basic rate band £0-31,785 £0-32,000
Higher rate band £31,786-£150,000 £32,001-150,000
Additional rate band Over £150,000 Over £150,000

2. Income tax allowances

2.1 Income tax allowances 2015-16

  2015-16
  % of income/£ per year
Personal allowance:  
Born after 5 April 19383 £10,600
Born before 5 April 19383 4 £10,660
Income limit for personal allowance3 £100,000
Income limit for personal allowances (born before 6 April 1938)4 £27,700
Marriage allowance:  
Marriage allowance5 6 £1,060
Married couple’s allowance for those born before 6 April 1935:  
Maximum amount of married couple’s allowance 7 8 £8,355
Minimum amount of married couple’s allowance 7 8 9 £3,220
Blind person’s allowance:  
Blind person’s allowance £2,290

2.2 Income tax allowances 2016-17

  2016-17
  % of income/£ per year
Personal allowance:  
Personal Allowance10 £11,000
Income limit for personal allowance10 £100,000
Income limit for married couple’s allowance11 £27,700
Marriage allowance:  
Marriage allowance12 13 £1,100
Married couple’s allowance for those born before 6 April 1935:  
Maximum amount of married couple’s allowance14 15 16 £8,355
Minimum amount of married couple’s allowance14 15 16 17 £3,220
Blind person’s allowance:  
Blind person’s allowance16 £2,290
Dividend allowance:  
Dividend allowance18 £5,000
Personal savings allowance:  
Personal savings allowance for basic rate taxpayers19 £1,000
Personal savings allowance for higher rate taxpayers19 £500

3. National Insurance contribution thresholds

  2015-16 2016-17
  £ per week £ per week
Weekly Lower Earnings Limit (LEL)20 112 112
Weekly Primary Threshold (PT)20 155 155
Weekly Secondary Threshold (ST)21 156 156
Upper Earnings Limit (UEL) 815 827
Upper Profits Limit (UPL) 42,385 per year 43,000 per year
Upper Secondary Threshold for U21’s 815 827
Small Profits Threshold (SPT)20 22 5,965 per year 5,965 per year
Lower Profits Limit (LPL) 8,060 per year 8,060 per year
Employment Allowance 2,000 (per year, per employer) 3,000 (per year, per employer)
Apprentice Upper Secondary Threshold (AUST) for under 25s23 - 827

4. Class 1 National Insurance contribution rates 2016-17

Employee (Primary)  
Earnings (£ a week)24 NIC rate (%)
Below £112 (LEL) 0
£112-155 (PT)25 0
£155-827 (UEL) 12
Above £827 2
Employer (Secondary)  
Earnings (£ a week)24 NIC rate (%)
Below £156 (ST) 0
Above £156 (ST) 13.8

5. Self-employed National Insurance contribution rates 2016-17

Annual Profits (£ a year)26 Class 2 (£ a week)27 Class 4 (%)
Below £5,965 (SPT)28 0.00 0
£5,965 to £8,060 (LPL) 2.80 0
£8,060 to £43,000 (UPL) 2.80 9
Above £43,000 2.80 2

6. Other NICs rates

  2015-16 2016-17
Married Women’s reduced rate (%)29 5.85% 5.85%
Special Class 2 rate for share fishermen30 £3.45 per week £3.45 per week
Special Class 2 rate for volunteer development workers30 £5.60 per week £5.60 per week
Class 3 rate30 31 £14.10 per week £14.10 per week

7. Working and Child Tax Credit rates and thresholds

7.1 Working Tax Credit

  2015-16 2016-17 Change
  £ a year £ a year  
Basic element 1,960 1,960 0
Couple and lone parent element 2,010 2,010 0
30 hour element 810 810 0
Disabled worker element 2,970 2,970 0
Severe disability element 1,275 1,275 0
Childcare element      
maximum eligible cost for one child £175 per week £175 per week 0
maximum eligible cost for two or more children £300 per week £300 per week 0
% of eligible costs covered (%) 70% 70% 0

7.2 Child Tax Credit

  2015-16 2016-17 Change
  £ a year £ a year  
Family element 545 545 0
Child element 2,780 2,780 0
Disabled child element 3,140 3,140 0
Severely disabled child element 1,275 1,275 0

7.3 Income thresholds and withdrawal rates

  2015-16 2016-17 Change
  £ a year £ a year  
Income threshold 6,420 6,420 0
Withdrawal rate (%) 41 41 0
First threshold for those entitled to Child Tax Credit only 16,105 16,105 0
Income rise disregard 5,000 2,500 2,500
Income fall disregard 2,500 2,500 0

8. Child Benefit and Guardian’s Allowance

  2015-16 2016-17 Change
  £ a week £ a week  
Child Benefit      
First Child 20.70 20.70 0
Second and subsequent children 13.70 13.70 0
Guardian’s Allowance 16.55 16.55 0

9. Tax-free Savings Account

  2015-16 2016-17
  £ a year £ a year
Individual Savings Account (ISA) subscription limit 15,240 15,240
Junior ISA subscription limit 4,080 4,080
Child Trust Fund (CTF) subscription limit 4,080 4,080

10. Fuel benefit charge

  2015-16 2016-17
Car fuel benefit charge multiplier 22,100 22,200
Van fuel benefit charge 594 598

11. Van benefit charge

  2015-16 2016-17
Van benefit charge 3,150 3,170
  1. From 2008-09 there is a starting rate for savings income only. If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income. 2

  2. From April 2016 the dividend tax credit will be abolished and replaced with a new £5,000 tax-free Dividend Allowance. 2 3

  3. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit. 2 3

  4. This allowance is subject to the £27,700 income limit. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit but is not reduced below £10,600 (unless the £100,000 income limit applies – see note 3). 2

  5. This transferable allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax; or not liable at the higher or additional rate, can transfer this amount of their personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rate.

  6. The relief for this allowance is given at 20%.

  7. This allowance is subject to the £27,700 income limit. The individual’s married couple’s allowance is reduced by £1 for every £2 above the limit. That reduction only applies after any reduction to their personal allowance (see note 2). The individual’s married couple’s allowance is never reduced below the minimum amount. 2

  8. The relief for this allowance is given at 10%. 2

  9. This is the maximum relief for maintenance payments where at least one of the parties was born before 6 April 1935.

  10. From 2016-17 onwards, all individuals will be entitled to the same personal allowance, regardless of the individuals’ date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit. 2

  11. This allowance is subject to the £27,700 income limit. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit but is not reduced below £10,600 (unless the £100,000 income limit applies – see note 10).

  12. This transferable allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax; or not liable at the higher or additional rate, can transfer this amount of their personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rate.

  13. The relief for this allowance is given at 20%.

  14. This allowance is subject to the £27,700 income limit. The individual’s married couple’s allowance is reduced by £1 for every £2 above the limit. That reduction only applies after any reduction to their personal allowance (see note 11). The individual’s married couple’s allowance is never reduced below the minimum amount. 2

  15. The relief for this allowance is given at 10%. 2

  16. These amounts are subject to indexation – the annual increase in CPI – and have been frozen for 2016-17 at 2015-16 levels in order to prevent any cash loss to individuals as a result of negative growth in CPI. 2 3

  17. This is the maximum relief for maintenance payments where at least one of the parties was born before 6 April 1935.

  18. From April 2016, the new Dividend Allowance means that individuals will not have to pay tax on the first £5,000 of dividend income they receive.

  19. From April 2016, the new Personal Savings Allowance means that basic rate taxpayers will not have to pay tax on the first £1,000 of savings income they receive and higher rate taxpayers will not have tax to pay on their first £500 of savings income. 2

  20. These thresholds are uprated by CPI. 2 3

  21. The Weekly Secondary Threshold is uprated by CPI.

  22. The Small Profits Threshold replaced the Small Earnings Exception on 6 April 2015.

  23. The Upper Secondary Threshold for Apprentices under 25 comes into effect on 6 April 2016.

  24. The limits are defined as LEL - lower earnings limit; PT - primary threshold; ST - secondary threshold; and UEL – upper earnings limit. 2

  25. No National Insurance contributions (NICs) are actually payable but a notional Class 1 NIC is deemed to have been paid in respect of earnings between LEL and PT to protect contributory benefit entitlement.

  26. The limits are defined as SPT – small profits threshold; LPL – lower profits limit and UPL – upper profits limit.

  27. Class 2 NICs are paid at a weekly flat rate of £2.80 by all self-employed persons unless they have profits below the small profits threshold. The rate is uprated by CPI.

  28. The self-employed may pay Class 2 contributions if their profits are below the SPT.

  29. Married Women’s Reduced Rate is paid only by married women and certain widows with valid reduced rate elections on earnings between PT and UEL and at 2% on earnings that exceed UEL.

  30. These rates are uprated by CPI. 2 3

  31. Class 3 NICs can be paid by contributors to make the year a qualifying year for basic State Pension, new State Pension and Bereavement Benefit purposes.