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?!