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By : Simon Gray

Could the new tax changes put a hole in your pocket or boost your savings?

With the new tax year coming into effect today it is important to be aware of the key changes that will affect your business and personal finances.

Let’s take a look at the good and not so good changes and initiatives affecting your pocket this year.

Auto enrolment contributions

From 6 April 2018 the minimum contribution rates for employers and employees will rise from a total of 2% to a total of 5% contribution. Employees will be required to contribute 3% and employers 2%.

From 5 April 2019 a second increase will take effect where employer minimum contribution will rise to 3% and employee minimum contribution will rise to 5%.

Minimum wage increase

The National Living wage (workers aged 25 and over) and National Minimum Wage (school leaving age and 24) will increase. Here are the rate increases:

  • Apprentices under 19  - increase from £3.50 to £3.70
  • Under 18 – increase from £4.05 to £4.20
  • 18 to 20 – increase from £5.60 to £5.90
  • 21 to 24 – increase from £7.05 to £7.38
  • 25 an over – increase from £7.50 to £7.83

Lifetime allowance increase

What is lifetime allowance? It’s the limit on the amount of pension benefit that can be drawn from pension schemes.

The government has confirmed that lifetime allowance will be rise from £1m to £1.03m. This is the first increase since 2010 from which lifetime allowance has gradually been cut, so this is great news for those who have a more than adequate pension pot!

Personal allowance increase

The amount of income you earn before you are required to pay income tax, personal allowance, will increase from £11,500 to £11,850.

State pension rises

The state pension will increase to 3% which will ease the pressure for pensioners struggling with high living costs. So, how much will the pensioners actually get from the 3% increase?

Those entitled to the new State Pension will see a rise from £159.55 per week to £164.35 a week – a £4.80 increase. Pensioners who are on the old State Pension will see an increase from £122.30 to £125.95 – an increase of £3.65

Higher-rate threshold

For those paying a higher rate of income tax, the threshold will rise by £1,350 – from £45,000 to £46,350.

Capital gains tax threshold increase

Capital gain tax is tax you pay on the profit when you sell an asset that has increased in value.

The Capital gain tax exempt amount for the 2018/2019 tax year will be £11,700, for individuals and representatives, an increase of £400 from the previous tax year. The exempt amount for trustees and settlements will be £5,850.

Dividend allowance cut

Following the Chancellor’s decision to cut the Dividend Allowance in 2017 Budget, from April 2018 the allowance will be cut from £5,000 to £2,000.

Who will be the main people affected by the cut? Directors of private companies who pay themselves in the form of dividends rather than a salary will be affected along with contractors, freelancers and small businesses.

Childcare vouchers delayed

Following a debate in The House of Commons, the employer backed childcare voucher scheme, which offers parents vouchers up to £55 per week to help with childcare payments, has been delayed by six months.

Want to know more about how the above changes may affect you and your business? Contact me for more information - simon@hentons.com.

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