The chancellor announced some budget changes last autumn and to get you prepared for the 2018/2019 tax year, we highlight a few of the significant changes that will impact most employers and businesses.
Increase in national minimum wage and national living wage
The government is increasing the National Minimum and National Living Wage rates on 1 April 2018. This includes the largest increases in a decade for the rates that apply to 18-20 and 21-24 year olds. As the minimum wage increases more employers than ever will be directly affected, including those who currently pay above the minimum.
Workplace pension: increase in minimum contributions
By law, on 6 April 2018 all employers are required to increase the amount of their minimum contributions into their staff’s automatic enrolment pension to at least of 2% of qualifying earnings. Members of staff will have to pay the shortfall needed to make the total minimum contribution up to 5%, including your client’s contribution.
This means that the minimum employer contribution will be 2% (1% in 2017) and the minimum employee contribution will be 3% (1% in 2017).
Personal tax allowance: this will increase to £11,850
Most tax payers will earn £11,850 tax free from 6 April 2018. This means an extra £70 in the pocket for basic rate taxpayers and an extra £140 for higher rate taxpayers.
Additionally, the threshold at which 40% tax applies will be raised from £45,000 to £46,350
Dividend tax: reduction in dividend allowance
The dividend allowance, introduced in 2016-17, of £5,000 is going to be reduced to £2,000 from 2018-19 and onwards. This is expected to result in an additional tax liabilities for basic tax rate payers.
Employment allowance: no change to the £3,000 a year limit
You will get up to £3,000 a year off your National Insurance bill if you are an employer. The allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run your payroll until the £3,000 has gone or the tax year ends (whichever is sooner).
Residential property letting tax: limitations on mortgage interest treatment reduces to 50%
The limitations on the mortgage interest treatment on residential property lettings increase for 2018-19. Around 50% of any interest compensated will be fully off-set from rental income, whereas, relief for the rest of the portion (50%) will be allowed as a basic rate tax reducer. The quantities were 75% and 25% in 2017-18, so additional and upper rate will be imposed on the tax payers, hence higher liabilities will be observed.
If you would like to discuss issues arising from this article or to find out more on other applicable budget changes, please contact Tobi Lab on 0330 311 2983 or send us an email – firstname.lastname@example.org
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