The new tax year has brought about many changes to pension contributions, personal allowances, income tax and dividend taxation. The NHF has compiled a handy run down of the changes that might impact your business.
Pensions: Employees who pay into auto-enrolment pensions will have to pay a minimum of 3% (up from 1%) while employer contributions will rise from 1% to 2%. Further increases for employers and employees will come into effect in April 2019.
Personal allowances: Personal allowances determine how much can be earned before having to pay income tax. This figure has increased from £11,500 to £11,850, which will mean a tax cut of £70 for most people.
Higher rate income tax: The level at which people will need to start paying a higher rate of 40% tax has risen from £45,000 to £46,350.
Scotland: For the first time, Scottish tax payers will have different rates to England and Wales. The £11,850 personal allowance is the same, but the first £2,000 of earnings after that are taxed at 19% rather than 20%. After that, it’s 20% tax until earnings hit £24,000, when it rises to 21%. Then above £43,430 the rate is 41%, with a top rate tax of 46% on earnings over £161,850.
Dividend taxation: A strategy for many self-employed people is to set up companies to take payments and pay out expenses, then pay themselves a dividend from the profits. This allows for income and therefore income tax bills to be minimised. Previously, self-employed hair and beauty professionals were able to earn £5,000 a year from dividend income before paying tax, but this figure has been reduced to £2,000.
For further information on the new tax year changes click here.