New HMRC 2018 Tax Rates in Gloucestershire by ESB Accountancy come into effect this month.
2018 Personal allowance tax rates
The personal allowance increases to £11,850 for the 2018/19 tax year. As for 2017/18, the personal allowance is reduced by £1 for every £2 by which adjusted net income exceeds £100,000. This means that anyone with income in excess of £123,700 in 2018/19 will not receive a personal allowance.
2018 Income tax rates and thresholds
The basic rate band is increased to £34,500 for 2018/19, raising the rate at which higher rate tax becomes payable to £46,350. As for 2017/18, the additional rate threshold remains at £150,000.
The rates of income tax in the UK (excluding Scotland) are unchanged for 2018/19, with the basic rate remaining at 20%, the higher rate at 40% and the additional rate at 45%.
2018 Dividend tax rates
The dividend tax rates for 2018/19 remain at 7.5% to the extent that dividend income falls in the basic rate band, at 32.5% to the extent that dividend income falls in the higher rate band, and at 38.1% to the extent that dividend income falls in the additional rate band. However, the dividend allowance – the band within which dividends are taxed at a zero rate – falls from £5,000 to £2,000 from 6 April 2018.
The dividend allowance was reduced from £5,000 to £2,000 with effect from 6 April 2018.
The dividend allowance is effectively a zero-rate band and dividends that are covered by the allowance are received free of tax. All individuals are entitled to a dividend allowance, regardless of whether they pay tax at the basic, higher or additional rate.
Many personal and family companies extract profits in the form of dividends once a small salary has been taken. Where possible, it is advantageous to ensure that the dividend allowance for 2017/18 is not wasted and, if necessary, declare and pay a dividend prior to 6 April 2018 in order to mop up any unused dividend allowance.
Assuming dividends of at least £5,000 are taken each tax year, the reduction in the dividend allowance from £5,000 to £2,000 will increase the tax paid on dividends by a basic rate taxpayer by £225, that payable by a higher rate taxpayer by £975 and the dividend tax payable by an additional rate taxpayer by £1,143.
2018 Capital Gains Tax Rates
The exempt amount for capital gains tax purposes is increased to £11,700 for 2018/19. The rates of capital gains tax remain at 10% to the extent that total taxable income and gains does not exceed the basic rate limit and at 20% where income and gains are more than the basic rate limit. Higher rates of, respectively, 18% and 28%, apply to gains on residential property.
2018 Corporation tax
The rate of corporation tax for the financial year 2018 (the year starting on 1 April 2018) remains at 19%.
VAT threshold
The VAT threshold is frozen at its current level of £85,000 for two years from 1 April 2018. The VAT de-registration threshold remains at £83,000.
2018 National Insurance contributions
For 2018/19 the lower earnings limit for Class 1 National Insurance purposes is increased to £116 per week, the primary and secondary thresholds are increased to £162 per week and the upper earnings limit is increased to £892 per week. The upper secondary threshold for under 21s and the apprentice upper secondary threshold, both aligned with the upper earnings limit, increase to £892 per week for 2018/19.
The main primary rate of Class 1 contributions remains at 12%, the additional rate remains at 2% and the secondary rate remains at 13.8%.
The National Insurance employment allowance remains at £3,000 for 2018/19.
The Class 2 small profits limit rises to £6,205 for 2018/19 and the weekly rate of Class 2 contributions increases to £2.95 per week.
The rate of voluntary Class 3 contributions increases to £14.65 per week for 2018/19.
The lower profits limit for Class 4 contributions increases to £8,424 for 2018/19 and the upper profits limit increases to £46,350. The main rate of Class 4 contributions remains at 9% and the additional rate remains at 2%.
Please talk to us at ESB Accountancy to discuss making the most of your tax rates – with several decades of financial experience here in Gloucestershire you can either ring us now on – email us on edith@esbaccountancy.co.uk or click the Contact Us button
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