A handful of new business and tax measures have come into effect following the start of the 2018/19 tax year, some of which are outlined below.
From 6 April, the tax-free Dividend Allowance has been reduced to £2,000 from £5,000. The change has been made in order to ‘address the unfairness associated with director-shareholders’ tax advantage’.
Meanwhile, from 6 April employers may need to increase the contributions they pay into their automatic enrolment workplace pension scheme. Some employers are now required to contribute a minimum of 2% on qualifying earnings, which has increased from the previous figure of 1%. A further increase to 3% is set to take effect from 6 April 2019.
Increases to the basic and higher rate income tax bands for England, Wales and Northern Ireland took effect from 6 April, whilst the personal allowance has risen from £11,500 to £11,850. Scottish taxpayers are entitled to the same personal allowance as the rest of the UK.
From 6 April, tax on income is different for taxpayers resident in Scotland. In the 2018/19 Scottish Draft Budget, Derek Mackay, Finance Secretary for Scotland, announced two new income tax bands, bringing the possible income tax rates payable up to five.
A new starter rate of 19% for the first £2,000 of income above the personal allowance was announced, alongside an intermediate rate of 21% for income between £24,000 and the higher rate threshold. The higher and top rates of tax have also increased to 41% and 46%.
Finally, the lifetime allowance (LTA) increased in line with the Consumer Price Index (CPI) from 6 April. The LTA is the maximum amount an individual can save into their pension scheme and still receive tax relief. For 2018/19, it has risen to £1,030,000 from £1,000,000.
For more information on the measures that took effect from 6 April and how they may affect you, please contact us.