5th April; end of the tax year

For many of us in the accounting world the end of the tax year is similar to Chinese New Year, except without the fireworks and parties; perhaps we should think of adopting this style!

As the end of March approaches I also have a pain in the neck! Not what you think, though dealing with the HMRC does often cause it. My neck pain is caused by having to look two ways at once – both forward to the new tax thresholds for the 2018-19 year and back to ensure that my clients have maximised their earnings potential for the year that is bowing out.

With that in mind here are a few pointers to consider:

  • The good news is that the dividend tax allowance at zero rate will remain the same. The bad news is that is only £2, 000. Gone are the days of the 10% tax credit and although few understood how this actually worked it did mean that for lower tax payers it was possible to extract income from their companies efficiently. I know some believe that this was unfair, that dividends gave an advantage; well, I would say to that, you try running your own company.
  • The personal tax allowance has been increased to £11, 850 per year. We will review the tax efficient salary for a Director and email any of you affected with a proposal.
  • The threshold at which you pay a higher rate of tax has increased to £34, 500 but the additional has stayed the same at £150, 000. The rates of tax paid have also stayed the same at 20%, 40% and 45%. Please remember that you only pay the higher rates of tax on the income over the thresholds, not the total income.
  • Returning to your glorious £2, 000 of zero rated dividend allowance, the rates on tax after this remain the same at 7.5% for ordinary tax payers, 32.5% higher payers and 38.1% additional rate payers.
  • For those of you in the Auto-enrolment pension schemes you need to be aware that the percentage applied will increase to most of the schemes. The staff contribution will increase to 3% and the employer 2%. A further increase will also take place next year though I’m not going to publish these as I’m pretty sure they will be changed during the year.
  • The main rate of corporation tax has reduced from 20% to 19% in 2018. This rate is due to remain for the 2019 year.

These are just a few headlines for the new tax year. If you have any specific questions please do get in touch as I know there are other areas of tax that you are affected by.

I also need to reiterate my favourite sentence – the 31st January 2019 is a deadline and not a target for your self-assessment returns. Please start pulling together information for your personal tax return as soon as possible. I will be contacting all my self-assessment clients within the next couple of months so we can get the ball rolling. The sooner you know your tax liability the better – well possibly?!

Paula

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