≡ Menu

Tax Rates and Allowances for Small Businesses – 2017/18

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

Tax Rates 2017/18Corporation 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.

Value Added Tax (VAT)

  • 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.

Dividend Tax

  • 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.

Income Tax – Personal Allowance

  • 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.

Income Tax Bands

  • 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.

National Insurance Contributions (NICs)

  • 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.

Pensions Savings Tax Relief

  • The annual allowance limit remains at £40,000.
  • The maximum tax-free lump sum is 25% of your pension pot.

Individual Savings Accounts (ISAs)

  • The overall ISA investment limit rises to £20,000.

Capital Gains Tax

  • 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.

Capital Allowances

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

Business Rates

  • 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.

Inheritance Tax

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

Stamp Duty Land Tax

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):

  • Up to £125,000 – no tax
  • £125,001 – £250,000 – 2%
  • £250,001 – £925,000 – 5%
  • £925,001 – £1,500,000 – 10%
  • £1,500,000 or more – 12%

More on tax for your small business and tax rate and allowances 2018/19.

Hiscox Business Insurance
Pay with monthly direct debits

Top Articles

Do I need an accountant for my limited company?
Find out what a limited company accountant could do for you.

Mortgages for limited company directors and contractors Are you self-employed and looking at getting a mortgage?

How much limited company tax do I have to pay? Find out the latest tax information for limited company owners.

Company Bug Newsletter

Keep up to date with small business news and guides by signing up to the Company Bug newsletter.