How will the new Tax and NI rates affect you?

The Autumn budget included an uplift in tax-free personal allowances and NI limits from 6th April 2018. What effect will they have on your tax bill and how do you plan to use your increased allowances?

Key TAX & NI changes

Since the 2017 Autumn budget, the tax-free allowance has been moving more towards the goal set out in the chancellor’s parliamentary term.

  • The personal allowance for the year 2017-18 was £11,500 this is due to increase to £11,850 for the year 2018-19.
  • The lower earnings threshold is also due to see an increase from £8,164 to £8,424.
  • Lastly, the upper earnings threshold will increase from £45,000 in 2017-18 to £46,350 in the year 2018-19.

If your earned income for the tax year 2017-18 and the next (2018-19) is greater than the personal allowance plus basic rate band, changes will save you £340 in income tax but will cost you an extra £103 in NI if your a director or an employee, or £73 if you’re self-employed.

Directors salary plus dividends

If your a director or shareholder who follows the popular TAX and NI saving strategy of taking a low salary plus dividends the change announced earlier in the budget to reduce the tax-free dividend allowance from £5000 in the year 2017-18 to £2000 in the year 2018-19 which means you’ll be at least £199 worse of.

The most efficient NI-Efficient salary for 2018-19 is £8,424 at this rate you won’t be liable for class 1 NI. The rest can be paid in dividends as the liability for dividends is still lower than PAYE.

For help with this or anything else please contact Nicola @ MEND Accounting Ltd


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