April 2018 to 2019 Tax Changes

What you need to know about Tax changes for 2018 to 2019

Household Bills

Council Tax: Local councils in England have been given the authority to raise council tax by up to 5.99%, adding more than £100 to the average property’s bill in April.

Personal Allowance: The amount of money you can earn before you start paying income tax will rise with inflation from the current level of £11,500 to £11,850.

Higher rate threshold: For higher rate taxpayers, the threshold will rise from £45,000 to £46,350 in the new tax year. The government has already committed to raising the higher rate threshold to £50,000 by 2020. (Applies to England & Wales only)

Prescriptions: The cost of a prescription will increase by 20p from £8.60 to £8.80 for each medicine or appliance dispensed from 1 April. (Applies to England & Wales only)

Minimum wages: The National Living Wage (NLW) currently stands at £7.50 an hour, but this will rise 4.4% to £7.83 from April, benefitting over two million people and adding £600 to annual incomes for full-time workers.

The National Minimum Wage (NMW) for those aged under 25 will also rise:

  • 21-24-year-olds: £7.38 per hour (up from £7.05 per hour)
  • 18-20-year-olds: £5.90 per hour (up from £5.60 per hour)
  • 16 and 17-year-olds: £4.20 per hour (up from £4.05 per hour)
  • Apprentices (aged under 19 or in the first year of their apprenticeship): £3.70 per hour (up from £3.50 per hour).

Tax 

Dividend Allowance: The tax-free DIVIDEND Allowance will be cut from £5,000 to £2,000 in the new 2018/19 tax year.

This will affect employees and directors of small businesses who might remunerate themselves partly or wholly through dividends rather than salary.

Investors with dividend generating shares and funds held outside ISAs and pensions may also be affected. Any dividend income above the current £5,000 allowance is taxed at the following rates:

Basic rate taxpayer – 7.5%

Higher rate taxpayer – 32.5%

Additional rate taxpayers and trustees – 38.1%.

Capital Gains Tax: CGT is charged on the profits made when certain assets are sold or transferred. If all gains in a tax year fall within the annual CGT allowance (£11,300 for 2017/18, £11,700 for 2018/19) there is no tax to pay.

Benefits

Marriage Allowance: The Marriage Allowance lets an individual who earns less than the Personal Allowance to transfer 10% of the allowance to their partner. This boosts the receiving partner’s Personal Allowance, meaning they can earn more before they start to pay tax. In the new tax year, married couples and civil partners may be eligible for a £237 tax break, but claims can also be backdated for four tax years (2015/16).

Childcare Vouchers: The Tax-free childcare scheme is replacing the Child Care Voucher Scheme Parents who are already members of a Childcare Voucher system should be able to continue to use it, as long as their employer is still providing access. But after 5 April, new members won’t be able to join the Childcare Voucher scheme.

Property

Energy Performance Certificates: As of 1 April, all buildings within the scope of Minimum Energy Efficiency Standards (MEES) must have a minimum Energy Performance Certificate (EPC) rating of E, or they will be illegal to rent out. Landlords face fines of up to £4,000 if they don’t meet the grade.

Mortgage interest: Last year, landlords could deduct their full Mortgage Interest costs from their income when calculating their tax bill. Now, landlords are only able to offset 75% of their mortgage interest. In the 2018/19 tax year, this figure will drop to 50%.

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The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of Mortgage Finder

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