The UK tax year begins on 6 April 2018 and the start of the new tax year in UK brings a raft of tax changes that you simply can’t afford to ignore as they all come into force in the coming months.
1. National Living Wage will increase
The National Living Wage for those aged 25 and over will increase from £7.50 per hour to £7.83 per hour from April 2018.
2. Tax-free personal allowance will rise
The personal allowance – the amount you earn before you start paying income tax – will rise from £11,500 to £11,850 from April 2018.
3. Income Tax bands of taxable income will rise
|Band||Tax rate||Taxable income 2018-19||Taxable income 2017-18|
|Pesonal Allowance||0%||Up to £11, 850||Up to £11,500|
|Basic rate||20%||£11, 851 to £46,350||£11,501 to £45,000|
|Higher rate||40%||£46,351 to £150,000||£45,001 to £150,000|
|Additional rate||45%||over £150,000||over £150,000|
4. Pension contribution will increase for automatic enrolment pensions
Under automatic enrolment, minimum pension contributions are required to increase over time. Beginning on 6 April 2018, employers may be required to increase the amount of their contributions into their automatic enrolment pension from 2% to 5%.
5. Main rate of National Insurance contributions (NICs) for the self-employed will increase
Currently, the self-employed may have to pay both Class 4 and Class 2 NICs:
Class 4 NICs at 9% are paid on profits, will rise from £8,164 to £8,424.
Class 2 NICs are paid on profits of £6,205 or more, will rise from £2.85 to £2.95.
6. Tax-free dividend allowance will be reduced
The dividend allowance will be reduced from £5,000 to £2,000 from April 2018.
7. Corporation tax will not change
Corporation tax main rate will remain at 19% from April 2018.
8. Small Businesses and landlords under the VAT threshold will have an extra year to prepare for Making Tax Digital (MTD)
Unincorporated businesses (businesses owned privately by one or more people) that have an annual turnover below the VAT registration threshold will have until April 2019 to prepare before MTD becomes mandatory.
Under MTD, businesses will use digital software to keep tax records and update HMRC quarterly.
9. VAT registration and deregistration thresholds will not change for 2 years
VAT registration and deregistration thresholds will remain at £85,000 for 2 years from 1 April 2018.
Article: Should I register for VAT
10. Business rates will switch to being increased by the Consumer Price Index (CPI)
Business Rates will rise by CPI from April 2018. Business rates currently rise by the Retail Price Index (RPI), a different way of measuring inflation which tends to be higher than the CPI.
You can find more information on GOV.UK
If you have any questions or need advice how this will affect you and your business, contact us.