With Budget 2018 and the new tax year 2019/20 in this blog post we will take a quick dive and review upcoming changes to personal, corporation and national insurance tax.
As the table above shows the percentages have not change since last tax year. The Personal Allowance has been increased by £650, which means that the first £12,500 of income is tax free.
|Income||Income tax %||Dividends tax %|
|£12,500||Personal allowance||Personal allowance|
|£12,500 - £50,000||20%||7.5%|
|Up to £150,000||40%||32.5%|
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 £12,500 would be taxed at basic rate at 20% up to £50,000, 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 £125,000 and above is reduced to £0.
Dividend allowance stays at £2,000, which means that the first £2,000 dividends are tax free.
National Insurance bands
The rates will stay the same as in previous tax year, just the changes in thresholds.
|Earnings||Employee NI %||Employer NI %|
The Employment Allowance will remain 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.
National Insurance for Self-employed
Class 2 NI won’t be scrapped as previously announced, and the rate will be rising by 5p per week, with slightly increased lower profits limit.
Class 4 NI rates remain at 9% and 2% and is still payable in addition to class 2.
|Earnings||NI Class 2||NI Class 4|
|Less than £6,365||-||0%|
|£6,365 - £8,632||£3 per week||0%|
|£8,632 - £50,000||£3 per week||9%|
|Above||£3 per week||2%|
Capital gains tax
The new capital gains tax exemption threshold has been increased to £12,000.
Annual allowance for pension contribution stays at £40,000 per annum and lifetime allowance increase to £1,055,000.
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 %|
The 2019/20 brings no change to corporation tax level which remains at 19%. The plans to lower the corporation tax to 17% is still on agenda for the next financial year.
The registration threshold is £85,000 and deregistration is £83,000.
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 are submitting our VAT return. From April 2019 we will need to send it digitally, submitted straight from the software, rather than input the numbers to HMRC website. It will compulsory for each business which is above the VAT threshold of currently £85,000.
The rates should be used as guidance only as it may change in individual circumstances.