A number of key changes are coming either from 1 April or at the start of the new tax year that will affect your business and you personally. The 2017/18 tax year ends on 5 April 2018 and the new tax year (2018/19) begins on 6 April 2018.
The tax-free dividend allowance will be cut from £5,000 to £2,000 from 6 April 2018.
Income tax rates
The bands and rates at which people in Scotland pay income tax have been significantly changed for 2018/19, but it will be business as usual for taxpayers in the rest of the UK. The following income tax bands and thresholds will be in place from 6 April 2018:
Table 1 – Taxable income bands and tax rates
|Starting rate* of 0% on savings up to||£5,000||£5,000|
|Basic rate band||£34,500||£33,500|
|Higher rate band||£34,501 – £150,000||£33,501 – £150,000|
|Additional rate band||Over £150,000||Over £150,000|
|Dividend ordinary rate||7.5%||7.5%|
|Dividend upper rate||32.5%||32.5%|
|Dividend additional rate||38.1%||38.1%|
*The starting rate does not apply if taxable non-saving income exceeds the starting rate limit.
Table 2 – Allowances that reduce taxable income or are not taxable
|Personal savings allowance:|
|Basic rate taxpayer||£1,000||£1,000|
|Higher rate taxpayer||£500||£500|
|Rent a room allowance||£7,500||£7,500|
|Blind person’s allowance||£2,390||£2,320|
*The personal allowance is reduced by £1 for each £2 of income from £100,000 to £123,700 (2017/18, £123,000).
**Any unused personal allowance maybe transferred to a spouse or civil partner who is not liable to higher or additional rate tax.
***Note that landlords and traders with gross income from this source in excess of £1,000 can deduct the allowance from their gross income as an alternative to claiming expenses.
Table 3 – Scotland
|Band||Taxable income 2018/19||Rate*|
|Personal allowance**||Up to £11,850||0%|
|Starter rate***||£11,851 to £13,850||19%|
|Basic rate||£13,851 to £24,000||20%|
|Intermediate rate***||£24,001 to £43,430||21%|
|Higher rate||£43,431 to £150,000||41%|
|Top rate||Above £150,000||46%|
**The personal allowance is reduced by £1 for each £2 of income from £100,000 to £123,700 (2017/18,£123,000).
***Indicates two new bands introduced for 2018/19.
Businesses need to be aware that from 6 April 2018, the minimum employer contribution towards an employee’s workplace pension will increase from 1% to 2%. These contributions are mandatory for workers aged between 22 and state pension age, earning more than £10,000 a year.
National living wage and national minimum wage
National minimum wage rates for all ages and apprentices are increasing from 1 April 2018.
For 18 to 20-year-olds and 21 to 24-year-olds, it will be the largest increase in a decade.
National living wages and national minimum wages rates (2018/19)
Pensions escaped an overhaul in Autumn Budget 2017 as the chancellor opted to leave the current system unchanged, apart from an increase to the lifetime allowance.
The lifetime allowance, which is the maximum amount an individual can draw from pensions without incurring extra tax charges, rises to £1.03 million from 6 April 2018.
The overall annual ISA subscription limit remains at £20,000, although the Junior ISA allowance increases to £4,260 from 6 April 2018. The £20,000 limit may also be used to invest in a Lifetime ISA, which has a maximum allowance in 2018/19 of £4,000.