It’s that time again when HMRC implements the changes introduced by the latest budget from the Chancellor of the Exchequer.
The 2018/19 tax year is now well underway. Below is a summary of some of the changes to tax allowances from the 6th April 2018.
Personal Allowance and Income Tax
The amount you can earn before paying income tax which is know as the personal allowance increased on the 6th April to £11,850 (from £11,500). This will lead to a small reduction in tax of £70 a year for most people.
The threshold for paying the higher-rate of income tax will also increase to £46,350. This amount includes the increased Personal Allowance. This means a reduction in tax of £337.50 per year for a limited company shareholder being paid £46,350 or more in dividends.
Capital Gains Tax
The Capital Gains Tax annual exempt amount has increased from £11,300 for individuals to £11,700 and from £5,650 to £5,850 for most trusts.
Property Tax
Phasing in since 2017/18 to 2020/21, the deduction for mortgage interest of let properties will to be restricted to a basic rate tax reducer. In 2018/19, finance costs on residential properties will be further restricted. 50% of finance costs will be an allowable deduction. The remaining 50% will be given as a basic rate tax deduction.
Inheritance Tax
The inheritance tax nil rate band remains at £325,000. The residence nil rate band has increased to £125,000 for the 2018/19 tax year.
Marriage Allowance
Marriage Allowance lets you transfer £1,190 of your Personal Allowance to your husband, wife or civil partner – if they earn more than you. This reduces their tax by up to £238 in the tax year (6 April to 5 April the next year). To benefit as a couple, you must have an income of £11,850 or less.
ISAs
The ISA allowance remains the same at £20,000. The limit on a Junior ISAs has increased to £4,260.
Pensions
The lifetime allowance has increased from £1,000,000 to £1,030,000. The State Pensions will go up by 3% which is a cash increase of £3.65 a week for those who are in retirement.
National Living Wage
The minimum hourly wage rate that your staff are entitled to depends on their age and whether they are an apprentice.
| Year | 25 years and over | 21 to 24 years | 18 to 20 years | Under 18 years | Apprentice |
| From April 2018 | £7.83 | £7.38 | £5.90 | £4.20 | £3.70 |
| From April 2017 | £7.50 | £7.05 | £5.60 | £4.05 | £3.50 |
Student Loans
The threshold at which graduates begin to pay back their student loan will go up:
Plan 1 loans will rise to £18,330 (currently £17,775)
Plan 2 loans will rise to £25,000 (currently £21,000)
Dividend Allowance
The Dividend Allowance has been reduced to £2,000 from £5,000 on 6th April 2018. If you’re a basic rate tax payer paying 7.5% tax on dividends, this means you’ll pay an additional £225 of income tax on the dividends paid by your company in the 2018/19 tax year.
Research & Development
R&D expenditure credit rate has increased from 11% to 12% to help support business in investment in R&D. This has been backdated to 1st January 2018.
Childcare vouchers
Childcare voucher scheme will remain open to new applicants until 1st April 2018. However, the government has confirmed that the closure is to be delayed by six months till the 1st October 2018.
Employees already registered with the childcare voucher scheme before 1st April 2018 can continue to use the scheme for as long as their employer offers it.
