With the financial statement behind and new tax year 2018/19 is on our doorstep, in this blog post we will take a quick dive and review upcoming changes to personal, corporation and national insurance tax.
As the table below shows the percentages have not change since last tax year. The Personal Allowance has been increased by £350, which means that the first £11,850 of income is now tax free.
|Income||Income tax %||Dividends tax %|
|£11,850||Personal allowance||Personal allowance|
Please note that the changes in Scottish tax has not been taken into account in this post.
If you have additional income as your salary, the amount above £11,850 would be taxed at basic rate at 20% up to £46,350, then higher tax rate at 40% up to £150,000 of earnings, and the additional rate of tax at 45% on the earning above £150,000.
The income limit for personal allowance stays without a change. As before the personal allowance will start reducing, on earnings above £100,000, £1 for each £2 of earnings and at £123,700 and above is reduced to £0.
Dividend allowance has been reduced from £5,000 to £2,000, which means that now only the first £2,000 dividends are tax free.
National Insurance bands
|Earnings||Employee NI %||Employer NI %||NI Class 4|
The 2018/19 employment allowance has been set at the level of £3,000 with the same restriction as last year, which means that it is not available for the businesses where only single person on the payroll is also a director, i.e. ‘single director employee’ limited companies.
Capital gains tax
The new capital gains tax exemption threshold has been increased to £11,700.
Annual allowance for pension contribution stays at £40,000 per annum and lifetime allowance increase to £1,030,000.
The percentages for pension under auto-enrolment are changing gradually:
|Period||Employee %||Employer %|
|Up to 06/04/2018||1%||1%|
|06/04/2018 to 05/04/2019||3%||2%|
The 2018/19 brings no change to corporation tax level which remains at 19%.
|Financial Year||Corporation tax %|
We are hopeful that the government fulfils the promise of 17% corporation tax, but have to wait two more years to see.
The major change to be recorded here is that we have to start preparing for Making Tax Digital – MTD, which will change the way we submit VAT return. From April 2019 we need to send all VAT returns digitally, submitted straight from the software, rather than input the numbers to HMRC website. It will compulsory for each business which is above the current VAT threshold of £85,000.