The new tax year is upon us and that means a host of previously-announced rule changes have now come into force.
Many will have an impact on small business owners and the self-employed, so it is important to be aware of them and to take advice to ensure that they don’t have an adverse effect on your or your business.
Here is our simple guide to the tax-rule changes for 2018-19 and their possible impact. If you would like to discuss any of the issues raised or to talk about any tax issues please contact me on 01772 430000.
Tax-free dividend allowance
From April 6 the amount of money you are allowed to earn from dividends before paying tax has fallen. The previous dividend allowance of £5,000 a year has now dropped to £2,000.
National Insurance contributions
This threshold for Class 2 and Class 4 NI contributions is now £6,205 a year – up from £6,025 in 2017-2018.
If you earn less than this, you won’t need to pay NI at all, though you can opt to make voluntary Class 2 contributions. The threshold for Class 4 has also gone up, from £8,164 to £8,424 in 2018-2019.
The rate for Class 2 contributions is also going up. In 2017-2018, you had to pay £2.85 per week– in this financial year it is £2.95 per week.
Class 2 NIC gives entitlement to contributions based benefits and, therefore, making a voluntary payment could be worthwhile.
Capital gains tax allowance
The capital gains tax allowance as to £11,700 in the 2018-19 tax year. This is up from £11,300 in the tax year prior. This means if you’re planning to sell an asset that qualifies for capital gains tax, you will get a smaller tax bill.
Personal allowance increases
For 2018/2019, the personal allowance is £11,850, up from £11,500 in the previous tax year.
The way business rates are increased has also changed. They will now be tied to the Consumer Prices Index (CPI). That could be good news for some businesses as CPI tends to be lower than the Retail Prices Index (RPI) that was used previously.
The government has announced that the threshold will remain at £85,000 for two years from 1 April 2018.
From this month, employers need to make a two per cent mandatory contribution into their employee’s pension fund – up from one per cent in the previous tax year. And it will rise to three per cent next April.
National Living Wage
Also from this month the National Living Wage has gone up to £7.83 from £7.50 –a 4.4 per cent increase. This means employers have to raise the wages for workers over 25 who are paid at the minimum wage.