With the new tax year just around the corner, there are increases in allowances and thresholds which could mean a higher take home for you and your family.
But what are the new allowances?
Tax and National Insurance
From 6th April 2018, the personal tax allowance will be increasing to £11,850 and national insurance threshold will be increasing to £8,484.
So what does this mean?
This means you can take home £988 per month without paying any tax, or £702 a month without paying any national insurance.
Tax Bands
The basic rate band has also increased to £34,500, which means the new higher rate tax bracket is now £46,350.
So what does this mean?
This means you can earn up to £46,350 a year (excluding the personal allowance of £11,850) without paying any higher rate tax.
Effective tax planning is always best completed before a year end. Book a consultation to see how we can help you.
National Minimum Wage
The minimum wage from 1st April 2018 for employees are as follows;
If you employee a team, you need to ensure you are paying them the minimum wage to stay compliant and not break the law.
What hasn’t changed?
Employers who run a payroll that are not director only payroll schemes will still be entitled to the £3,000 employers national insurance allowance, meaning your PAYE liabilities are reduced by £3,000 per year.
Tax percentages have also stayed the same;
Employed and self-employed income
Basic rate 20%
Higher rate 40%
Additional rate 45%
Dividend income
Basic rate 7.5%
Higher rate 32.5%
Additional rate 38.1%
The bad news…
From 6th April 2018, the dividend tax allowance has dropped from £5,000 to £2,000.
So what does this mean?
This means that only £2,000 of your dividend income is tax free, with the remainder being taxed at 7.5% & 32.5% (higher rate).
This will result in an additional £225 of tax to pay on your dividend income (not taking into account the increase in tax allowance).
How we can help?
Do you want to extract money from your business in the most efficient way without paying a penny more in tax than you need to?
Then come and talk to us about our tax planning and remuneration planning, so we can ensure you do not pay a penny more in tax than you need to.
Why not also download a copy of our 71 Ways to Pay Less Tax to see how you could reduce your tax bill.
