Measures coming into effect in the new tax year

Reviewing the changes to tax and business legislation taking effect from April 2018.

The 2018/19 tax year starts on 6 April 2018, and along with it some changes to tax and business legislation will come into effect. Here, we outline some of the key measures.

Increase in employers’ auto-enrolment contributions

Currently the pension auto-enrolment legislation requires employers to contribute at least 1% on qualifying earnings. From 6 April 2018, employers may be required to increase the contribution they pay into their automatic enrolment workplace pension scheme. Affected employers will be required to pay a minimum of 2% from this time. A further increase to 3% is set to take place from 6 April 2019 onwards. 

Reduction in the Dividend Allowance

The Dividend Allowance is set to reduce to £2,000 on 6 April 2018 from its current level of £5,000. This reduction comes just two years after the legislation was first introduced, and is being implemented in order to ‘address the unfairness associated with director-shareholders’ tax advantage’.

If you are a director of your own company, you will need to use tax planning strategies to optimise how you extract profit from your business - please contact us for more information.

Increase in National Minimum Wage (NMW) and National Living Wage (NLW) rates

From 1 April 2018, the NMW will increase to £7.38 per hour for workers aged 21-24, and to £5.90 an hour for workers aged 18-20. For workers who are aged 16-17, the NMW will rise to £4.20 per hour, and for apprentices, the rate will rise to £3.70 an hour. An apprentice is an individual who is aged under 19, or 19 and over and in the first year of their apprenticeship. Meanwhile, the NLW for employees aged 25 and over will increase to £7.83 per hour.

The Land Transaction Tax (LTT)

For those seeking to purchase a residential property in Wales, there will be no tax to pay on a home worth up to £180,000 from 1 April 2018. This benefits all buyers, not just first-time buyers. Individuals purchasing property worth between £180,000 and £250,000 will need to pay LTT at 3.5%, and those buying property worth between £250,000 and £400,000 will pay 5%. Further increases in LTT are 7.5% for properties worth between £400,000 and £750,000, 10% for properties worth between £750,000 and £1,500,000, and 12% for properties worth more than £1,500,000.

The new Scottish income tax bands

From 6 April 2018, tax on income will be different for taxpayers who are resident in Scotland to those elsewhere in the UK. In the 2017 Scottish Budget, the Finance Secretary for Scotland, Derek Mackay, announced two new income tax bands, bringing the total to five. The new Scottish income tax rates range from 19% to 46%. However, savings and dividends income is still taxed at the UK rate, and Scottish taxpayers are entitled to the same personal allowance as the rest of the UK.

Rise in the pensions Lifetime Allowance (LTA)

The LTA is the maximum amount an individual can save into their pension scheme (excluding the state pension) and still benefit from tax relief at their marginal rate. The LTA has increased in line with the Consumer Price Index (CPI), and for 2018/19 it will rise from £1,000,000 to £1,030,000. You can continue to save into a pension scheme, but any income above the LTA will be liable to tax.

When there is a pay-out from your pension scheme, its value is compared against the remaining LTA to calculate any outstanding additional tax.

As your accountants, we can advise you on how the measures taking effect from April 2018 could affect your business or personal finances. Please get in touch with us for more information.


Newswire

Why not register to receive our Monthly Newswire? Once a month we'll send you an email packed full of essential business news and handy tax tips to help save you money.

Sign up today »


Quick Links

Home | Contact us | Accessibility | Disclaimer | Help | Site map |

© 2018 Blue Spire Limited. All rights reserved.

We use cookies on this website, you can find more information about cookies here.

Contact Chichester Office

Tel: +44 (0)1243 781234
Fax: +44 (0)1243 791770
Email: chichester@bluespiregroup.com


Contact Brighton Office

Tel: +44 (0)1273 739533
Fax: +44 (0)1273 732844
Email: brighton@bluespiregroup.com

Chichester Address
Cawley Priory, South Pallant, Chichester, West Sussex PO19 1SY

Brighton Address
5th Floor Intergen House, 65-67 Western Road, Hove, East Sussex BN3 2JQ

Blue Spire Limited is Registered to carry out audit work in the UK and Ireland and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales C004152645. Professional indemnity insurance is provided by Royal & Sun Alliance Insurance Plc 9th Floor, One Plantation Place, 30 Fenchurch Street, London, EC3M 3BD and its territorial coverage is worldwide (excluding United States/Canada).
Blue Spire Financial Planning Limited is authorised and regulated by the Financial Conduct Authority. FSA register https://www.fca.org.uk/register reference 566257. This guidance and/or advice contained within this website is subject to the UK regulatory regime, and is therefore targeted at customers based in the UK