Tax Rates and Allowances for Small Businesses – 2017/18

March 2, 2018

Here are the main tax rates and allowances for 2017/18, that are most relevant to small businesses.

Corporation Tax

You have to pay 19% Corporation tax if your profit falls below £300,000.
If your annual profit exceeds £300,000 then you have to also pay 19% corporation tax. You can find out more in our corporation tax guide.

From 1st April 2017, you have to register for VAT if your turnover over the past 12 months is £85,000 or more.
The de-registration threshold is £83,000.

Tax on dividends is paid at a rate set by HMRC on all dividend payments received.
Anyone with dividend income will receive £5,000 tax-free, no matter what non-dividend income they have.
Dividend basic rate is 7.5%. £0 to £33,500 on taxable income over the Personal Allowance In England.
Dividend higher rate is 32.5%. £33,501 to £150,000 on taxable income over the Personal Allowance In England
Dividend additional rate is 38.1%. Over £150,000 of taxable income.

The personal allowance (the amount you can earn before any income becomes taxable) is £11,500.
If your income is higher than £100,000 this year, you lose £1 of this personal allowance for every £2 you earn above this threshold.
You don’t get a Personal Allowance on taxable income over £123,000.

The basic rate band is 20% and applies to income up to £33,500.
The higher rate band is 40% and applies to income from £33,500 to £150,000.
The upper (additional) rate band is 45% and applies to income of £150,000 and above.

If you run a company (or work for one), then Class 1 NICs apply.
Employees’ Class 1 NICs are payable at 12% on salaries received between £157 and £866 per week, and at 2% on income received above £815 per week.
Employers’ Class 1 NICs are payable at 13.8% on earnings above £157 per week.
For sole traders and partnerships, you pay Class 2 and Class 4 NICs.
Class 2 NICs are payable at £2.85 per week and are paid by anyone earning £6,025 or more through self-employment during the tax year.
Class 4 NICs are paid on profits you make as a self-employed person. The Class 4 NI rate is 9% of annual profits between £8,164 and £45,000, and 2% on profits above £45,000 per year.
Read our guide on National Insurance for further information.

If you pay higher rate income tax you’ll pay 28% on your gains from residential property, and 20% on your gains from other chargeable assets.
If you pay basic rate income tax you’ll pay 18% on your gains from residential property, and 10% on your gains from other chargeable assets.
You’ll pay 10% if you’re a sole trader or partnership and your gains qualify for Entrepreneurs’ Relief.
Each individual has an annual CGT exemption of £11,300.

The Annual Investment Allowance (AIA) is £200,000 and has remained at this since 01/01/2016.
First-year allowances remain at 100%.

Find the rateable value (RV) of your business and multiply by the applicable multiplier below.
There are two multipliers: standard non-domestic rating multiplier is 47.9p for 2017/18 and small business non-domestic rating multiplier is 46.6p for 2017/18
Businesses with an RV of less than £51,000 use the small business multiplier if RV is £51,000 or more use the standard multiplier.

The Inheritance Tax Threshold (IHT) remains at £325,000. The standard inheritance tax rate is 40% of anything over the £325,000 threshold.

The SDLT regime rates are as follows, charged on a progressive basis (i.e. no longer just on the band into which the purchase price falls):