Changes in 2018/19

The new tax year started last Friday and there are some very significant changes for small business owners.   The government often focus on the increases in tax free allowances and tax brackets going up so that we will save money but the decrease in the tax free dividend allowance will almost certainly mean that small business owners will be worse off this year.  You can download the Focus Accountancy tax app to get up to date tax rates as well as lots of other useful features but we’ve also summarised most of the important changes that may affect you below:

Tax rates

• Your personal allowance goes up from £11,500 to £11,850;

• You start paying national insurance after £8,424 rather than £8,164;

• You’ll only get £2,000 worth of tax free dividends instead of £5,000;

• Higher rate tax will be paid after £46,350 rather than £45,000;

Most of these changes are fairly minor in the grand scheme of things but the 60% reduction in the tax free dividend allowance will cost those who receive more than £5,000 in dividends at least £225 more and could cost higher earners over £1,000!

Minimum wage rates

• Age under 18 has risen from £4.05 to £4.20;

• Age 18 to 20 has risen from £5.60 to £5.90;

• Age 21 to 24 has risen from £7.05 to £7.38;

• Age 25 and over has risen from to £7.50 to £7.83.

These increases are broadly similar to last year’s increase but for anyone who employs full time minimum wage workers, it’s going to cost almost £650 extra per employee this year.

Auto enrolment pension contributions

• The minimum contribution for employees goes up from 1% to 3%;

• The minimum contribution for employers goes up from 1% to 2%.

This is the first stage of 2 planned increases that will eventually result in employees contributing at least 5% of qualifying income and employers contributing at least 3% into a pension scheme.