Income Tax Update for 2016

With the new Tax Year, comes an increase in your Personal Allowance, Income Tax bands and Marriage Allowance.


The tax-free allowance

For the tax year 2016-2017, the standard tax-free Personal Allowance has been raised to £11,000. 

Your Personal Allowance may be higher if you get Blind Person's Allowance or if you were born before 6 April 1938, whereas it'll be smaller if you earn more than £100,000 a year - your Personal Allowance will decrease by £1 for every £2 of income above £100,00, meaning that you won’t receive any Personal Allowance on income above £122,000.

For details on the 2015-2016 Personal Allowance, please see our original article "The Ins and Outs of Income Tax."


Tax bands

How much tax you pay depends on how much you earn over your Personal Allowance, and any income after your Personal Allowance will be taxed:

So, if you're on a salary of £45,000, you won't pay any tax for the first £11,000. After that, you'll pay 20% on £32,000, and then 40% on the remaining  £2,000 - and don't forget that anyone earning above £100,000 will have a lower tax-free Personal Allowance. 

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Will my savings and dividends be taxed?

The only exceptions to savings interest is your Personal Savings Allowance, Individual Savings Accounts (ISAs) and some National Savings and Investments products like savings certificates and Premium Bonds. The ISA allowance for tax year 2016-2017 is £15,240.

Dividends are taxed differently to normal income – no tax is paid on the first £5,000 of dividends received per year, and dividend income after this allowance is taxed at a lower rate than your income. The tax rate on dividend will depend on which tax band you fall into.

Tax Band Tax rate on dividends over £5,000
Basic rate & non-taxpayers 7.5%
Higher rate 32.5%
Additional rate 38.1%

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Income Tax on GOV.UK Verify

You can now access several tax-related services online through GOV.UK Verify, and more services are being added to list!

When you register with GOV.UK Verify, you'll need to have your identity checked. CitizenSafe is one of the Government's trusted providers of identity checks and you'll be able to choose us when you log into GOV.UK Verify.


Try our CitizenTax App

We know that tax can be, well, taxing! So we made the CitizenTax app to make your life a little simpler. CitizenTax is available through iTunes and GooglePlay


Find out more

Keep up-to-date with the services you can access through GOV.UK Verify on our website,  and find out about all the other government services available online at GOV.UK

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