Happy and Tax aren’t often seen in the same sentence as each other but a New Tax Year is normally a happy event with increases to personal allowance bands meaning contractors can normally see a bit more in their take home pay each week.

Personal Taxation Changes:

(which affect all tax payers)

Bands of taxable income and corresponding tax rates

(*) 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.

Income tax allowances

*1 The personal allowance reduces where the individual’s income is above this limit by £1 for every £2 above the limit. This applies regardless of the individual’s date of birth.

*2 This allowance reduces where the individual’s income is above the income limit by £1 for every £2 above the income limit until it reaches the level of the personal allowance for someone born after 5 April 1948.

*3 Available to people born before 6 April 1935. Tax relief for this allowance is restricted to 10 per cent.

*4 This allowance is reduced when the individual’s income is above the income limit. This is at a rate of £1 for every £2 above the income limit until it reaches the minimum amount. Any reduction in the married couple’s allowance applies after any reduction to the individual’s personal allowance.

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

*6 Available to spouses/ civil partners born after 5 April 1935. This allowance is 10% of the personal allowance for those born after 5 April 1938. It allows a spouse or civil partner who is not liable to income tax above the basic rate to transfer this amount of their personal allowance to their spouse/ civil partner. The recipient must not be liable to tax above the basic rate. The recipient is eligible to a tax reduction of 20% of the transferred amount.

National Insurance contribution thresholds

*1 These thresholds are uprated by CPI.

*2 The Weekly Secondary Threshold is uprated by RPI.

*3 Upper Secondary Threshold (UST) introduced from April 2015 for employees under the age of 21. The rate of secondary NICs for employees under the age of 21 on earnings between the ST and UST will be 0%.

*4 The Small Profits Threshold replaces the Small Earnings Exception from 6 April 2015.

Class 1 National Insurance contribution rates 2015-16

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

*2 The contracted-out rebate for primary contributions is 1.4 per cent of earnings between the LEL and upper accrual point (UAP) of £770 for contracted-out salary-related schemes (COSRS).

*3 The contracted-out rebate for secondary contributions is 3.4 per cent of earnings between the LEL and UAP for COSRS.

*4 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.

Self-employed National Insurance contribution rates 2015-16

*1 The limits are defined as SPT - small profits threshold; LPL - lower profits limit and UPL - upper profits limit.

*2 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

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

Further information: https://www.gov.uk/government/publications/tax-and-tax-credit-rates-and-thresholds-for-2015-16/tax-and-tax-credit-rates-and-thresholds-for-2015-16

Company Taxation Changes:

(for contractors operating through their own limited companies)

Profits from 1^st April 2015 are taxable at a Corporation Tax Rate of 20%. For small owner managed businesses this remains unchanged.