Over the past few months, we’ve been making clients aware of the changes and things to be aware of for the new tax year. During our conversations, we’ve been surprised at how many clients were unaware of the changes.
So now we’re a week into the new tax year, we thought we’d put together a useful summary of the new allowances that are now in place.
• The Dividend Allowance is being reduced to £2,000 (from £5,000) on 6th April 2018. For company directors taking income as dividends or those receiving dividends from investments, tax will therefore be payable on all drawings over £2000 at the following rates: 7.5% for basic rate taxpayers, 32.5 % for higher-rate taxpayers and 38.1 % for additional-rate taxpayers.
• The Capital Gains Tax annual exempt amount increases in line with the Consumer Price Index from £11,300 for individuals to £11,700.
• The Personal Allowance – the amount you can earn before paying income tax – will increase on 6th April to £11,850 (from £11,500). The level at which higher rate tax (40%) becomes applicable will rise from £45,000 to £46,350.
• For the first time this April, Scottish taxpayers will have different rates from those in England and Wales. These are as follows:
Starter rate – 19% – from £11,850 to £13,850
Basic rate – 20% – from £13,851 to £24,000
Intermediate rate – 21% – from £24,001 to £44,273
Higher rate – 41% – from £44,274 to £150,000
Additional rate – 46% – from £150,000
• From 6th April, those who own a home will face less inheritance tax (IHT) when passing it on to their ‘direct descendants’. The additional exemption for main properties (called the Residence Nil Rate Band – RNRB), which was introduced in April 2017, will rise from £100,000 to £125,000. NB. There is no increase in the main exemption – the first £325,000 of any estate.
• From 6th April, the Pensions Lifetime Allowance – the most you can have in a pension pot without potentially suffering a tax charge on any excess – is going up from £1m to £1,030,000.
For further help in relation to any of the above changes or advice specific to your circumstances, please contact us.
NB: The Financial Conduct Authority does not regulate tax planning.