Guide to Budget Tax Rates and Allowances 2018

   2017/18    2018/19    2019/20
   £    £    £
Income tax rates not including Scotland – (non-dividend income) As announced or unchanged
0% – starting rate for savings only – note 1    Up to 5,000 Up to 5,000 Up to 5,000
20% basic rate tax    11,501 – 45,000 11,851 – 46,350 12,501 – 50,000
40% higher rate tax    45,001 – 150,000 46,351 – 150,000  50,001- 150,000
45% additional rate tax Above 150,000 Above 150,000  Above  150,000
1 If an individual’s taxable non-savings income exceeds the starting rate limit, then the starting rate for savings will not be available for savings income
Scottish rates of income tax Budget  date 12/12/2018
   19% – starting rate  11,850 – 13,850
   20% basic rate tax 13,851 – 24,000
   21% intermediate rate tax 24,001 – 43,430
   41% higher rate tax 43,431 – 150,000
   46% top rate Above 150,000 Above 150,000
   Notes on changes to the Welsh tax system from 6 April 2019 Budget date 18/12/18

If you live in Wales, HMRC will continue to collect your Income Tax as usual. However, for the first time, a proportion of that Income Tax will be transferred straight to the Welsh Government. It will be spent on public services in Wales.

From April 2019, the UK government will reduce each of the 3 rates of income tax – basic, higher and additional rate – paid by Welsh taxpayers by 10p. Each year, the Welsh Government will then decide the 3 Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.

3 Personal allowance and basic rate limit is set same for 2020-21 as in 2019-20. Future increases will be indexed with the CPI.

   Income tax rates – (dividend income new rules from 6/4/2016)
   Dividend allowance    £5,000    £2,000    £2,000
   Dividend ordinary rate (for dividends within basic rate band)    7.50%    7.50%    7.50%
   Dividend upper rate (for dividends within higher rate band)    32.50%    32.50%    32.50%
   Dividend additional rate (for dividends above higher rate band)    38.10%    38.10%    38.10%
   Child benefit/Guardian’s allowance rates
   Higher rate (eldest child only) (per week)    20.7    20.7    20.7
   Other children    13.7    13.7    13.7
   Guardian’s allowance    16.7    17.2    17.6
    1 An income tax charge will apply to taxpayers with income exceeding £50,000 in a tax year when child benefit is also received by them or their partner. The charge will reduce the financial benefit of receiving child benefit for those with income between £50,000 and £60,000 and remove it completely for taxpayers with income above £60,000.
   Personal allowances
   Personal allowance – note 1    11,500    11,850    12,500
   Dividend allowance    5,000    2,000    2,000
   Maximum Married couple’s allowance for those born before 6 April 1935 – note 2    8,445    8,695    8,915
   Married couple’s allowance – minimum amount    3,260    3,360    3,450
   Microentrepreneurs allowance:
 Individuals making property or trading incomes below the level of the allowance would no longer need to declare or pay tax, while those whose income exceeds the allowance have the choice of simply deducting the allowance instead of calculating their exact expenses or calculating their profits in the normal manner Allowance – 1,000 Allowance – 1,000 Allowance – 1,000
   Income limit – note 3    100,000    100,000    100,000
   Income limit for Married couple’s allowance- born before 6 April 1935    28,000    28,900    29,600
   Blind person’s allowance    2,320    2,390    2,450
   Rent-a-room relief    7,500    7,500    7,500
   Transferable/shareable tax allowance for married couples and civil partners – note 4    1,150    1,190    1,250
   Personal savings allowance for basic rate tax payers – note 5    1,000    1,000    1,000
   Personal savings allowance for higher rate tax payers    500    500    500
   1 From 2016-17 onwards, all individuals will be entitled to the same personal allowance, regardless of the individuals’ date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth.
   2 This allowance is reduced by £1 for every £2 of income in excess of the income limit, but married couple’s allowance will not reduce below £3,450
    3 Personal allowances are subject to the £100,000 income limit which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit, down to zero

   4 This allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax; or not liable at the higher or additional rates, can transfer this amount of their unused personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rates.

   If the couple marries or registers a civil partnership, they’ll get the allowance on a pro-rata basis for the rest of that tax year. If one of them dies there is a divorce or separation, the allowance continues until the end of the tax year.

   National insurance
   Lower earnings limit, primary Class 1 (per week)    113    116    118
   Upper earnings limit, primary Class 1 (per week)    866    892    962
   Apprentice upper secondary threshold (AUST) for under 21s/ 25s    866    892    962
   Primary threshold (per week)    157    162    166
   Secondary threshold (per week)    157    162    166
   Employment allowance (per year/employer) – note 1    3,000    3,000    3,000
   Employee’s primary Class 1 rate between primary threshold and upper earnings limit    12%    12%    12%
   Employee’s primary Class 1 rate above upper earnings limit    2%    2%    2%
   Married woman’s reduced rate between primary threshold and upper earnings limit    5.85%    5.85%    5.85%
   Married woman’s rate above upper earnings limit    2.00%    2.00%    2.00%
   Employer’s secondary Class 1 rate above secondary threshold    13.80%    13.80%    13.80%
 Class 2 rate (per week where profits are above small profits threshold) 2.85 2.95 3.00
   Class 2 small profits threshold (per year)    6,025    6,205    6,365
   Special Class 2 rate for share fishermen (per week)    3.5    3.6    3.65
   Special Class 2 rate for volunteer development workers    5.65    5.80    5.90
   Class 3 voluntary rate (per week)    14.25    14.65    15.00
   Class 4 lower profits limit    8,164    8,424    8,632
   Class 4 upper profits limit    45,000    46,350    50,000
   Class 4 rate between lower profits limit and upper profits limit    9.00%    9.00%    9.00%
   Class 4 rate above upper profits limit    2.00%   2.00%    2.00%
   Note 1: From April 2020, this will be limited to employers with an employer NICs bill below £100,000 in the previous tax year.
   Pensions
   Annual allowance – note 1    40,000    40,000    40,000
   Lifetime allowance    1,000,000    1,030,000    1,055,000
   Money purchase annual allowance – note 2    4,000    4,000    4,000

    1 The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes. The annual allowance is currently capped at £40,000 although a lower limit of £4,000 may apply if you have already started drawing a pension. From 2016/17 the annual allowance for those earning above £150,000 is to be reduced on a tapering basis by £1 for every £2 of income, subject to a minimum allowance of £10,000

   Relief’s and incentives
   Enterprise Investment Scheme (EIS) – maximum – note 1    1,000,000    1,000,000    1,000,000
   Venture Capital Trust (VCT) – maximum    200,000    200,000    200,000
   Enterprise Management Incentive Scheme (EMI) -employee limit up to the value of

   £250,000 in a 3-year period

   250,000    250,000    250,000
   Seed Enterprise Investment Scheme (SEIS) – maximum – note 2    100,000    100,000    100,000
   Income tax relief on EIS schemes    30%   30%    30%
   Income tax relief on VCT schemes    30%    30%    30%
   Income tax relief on SEIS schemes    50%    50%    50%
   1    From 6 April 2018, the annual limit is doubled to £ 2 million, provided any amount over £ 1 million is invested in one or more ‘knowledge-intensive companies’

   2    Capital gains tax reinvestment relief may also be available for investments made in 2018/19 on 50% of amount invested.

   Individual Savings Account (ISA):
   ISA (NISA) annual limit    20,000    20,000    20,000
   Junior ISA investment annual limit – under 18 living in the UK    4,128    4,260    4,368
   Child value of Child Trust Fund annual limit    4,128    4,260    4,368
   LISA- annual limit – note 1    4,000    4,000    4,000
   1 To open a Lifetime ISA you must be 18 or over but under 40. Contributions can be made until age 50. The government will add a 25% bonus to the savings, up to a maximum of £1,000 per year. The Lifetime ISA limit of £4,000 counts towards the annual ISA limit.
   Capital gains tax
   Rate
   – basic rate tax payer    10%    10%    10%
   – higher rate tax payer    20%    20%    20%
   Gain on sale of residential property
   – basic rate tax payer    18%    18%    18%
   – higher rate tax payer    28%    28%    28%
   Annual exemptions – individuals (per year)    11,300    11,700    12,000
   Certain trusts for disabled persons (per year)    11,300    11,700    12,000
   Other trusts (per year)    5,650    5,850    6,000
   Entrepreneurs/Investors Relief lifetime limit    10,000,000    10,000,000    10,000,000
   Entrepreneurs/Investors Rate    10%    10%    10%
   Chattels exemption    6,000    6,000    6,000
   Inheritance tax
   Single persons nil rate band    1 – 325,000    1 – 325,000    1 – 325,000
   Single persons 40% band    over 325,000    over 325,000    over 325,000
   Residence nil rate band (RNRB) – maximum – note 2    100,000    125,000    150,000
   Reduced rate – note 1    36%    36%    36%
   IHT Rate (for chargeable lifetime transfers)    20%    20%    20%
   Married couples or civil partnerships allowance nil rate band    650,000    650,000    650,000
   Gifts to charities    Exempt    Exempt    Exempt
   Small gifts to same person    250    250    250
   General gifts- annual exemption    3,000   3,000    3,000
   Wedding gifts from:
   Parent    5,000    5,000    5,000
   Grandparent/party    2,500    2,500    2,500
   Other person    1,000   1,000    1,000
   Business Property Relief
   Business or interest in a business and transfer if unquoted shareholdings    100%    100%    100%
   1 The estate can pay Inheritance Tax at a reduced rate of 36% on some assets if you leave 10% or more of the ‘net value’ to charity in your will.
   2 The RNRB is available in respect of a main residence given away to children (including adopted, foster or stepchildren). Any unused nil rate band transfers to the deceased’s spouse or civil partner, even where death pre-dates the availability of the additional threshold. It applies in addition to the existing nil rate band (NRB) or threshold (currently £325,000) if the individual and estate meet the qualifying conditions.
   Taxation of trusts
   Accumulation or discretionary trusts:
   Trust income up to £1,000 – dividend type income – note 1    7.50%    7.50%    7.50%
   Trust income up to £1,000 – all other income    20%    20%    20%
   Trust income over £1,000 – dividend type income – note 1    38.10%    38.10%    38.10%
   Trust income over £1,000 – all other income    45%    45%    45%
   Interest in possession trusts:
   Dividend type income    7.50%    7.50%    7.50%
   All other income    20%    20%    20%
   1 Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.
   Corporation tax
All profits and gains (excluding determination agreements and diverted profits) – note 1    19%   19%    19%
S455 tax on all loans made by close companies to participator    32.50%    32.50%    32.50%
From 1 April 2020, the main rate of corporation tax will be reduced to 17%
   Capital Allowances
   Main writing down allowance (reducing balance)    18%    18%    18%
   Special rate writing down allowance (reducing balance)    8%    8%    6%
   Structures and Buildings allowance (SBA) – note 1    NA    2% 2%
   Motor Cars- if CO2 > 75g/km but do not exceed 110g/km (130g/km for 2017/18)    18%    18%  18%
   Motor Cars- if CO2 > 110g/km (130g/km for 2017/18)    8%    8%    8%
   Small pool write off where WDV is £1,000 or less    100%    100%    100%
   (New and unused) CO2 emissions are 50g/km or less (75g/km 2017/18) – (or car is electric)    100%    100%    100%
   First year allowances for certain energy-saving/water efficient products – note 2    100%    100%    100%
   Annual investment allowance (AIA) – note 3    200,000    200,000 increased to 1,000,000    1,000,000
   Annual investment allowance    100%    100%    100%

   1 From 29 October 2018, capital allowances at a rate of 2% will be available for qualifying non-residential structures and buildings on a straight-line basis.

   2 From 1 April 2020 for incorporated businesses and from 6 April 2020 for unincorporated businesses, environmental enhanced capital allowances will be abolished.

   3 From 1 January 2019, the annual investment allowance will increase from £200,000 to £1m for investments made from 1 January 2019. This is temporarily increased for two years until 31 December 2020. The threshold will revert back to £200,000 from 1 January 2021.

   Research and Development Tax Credit Rates
   SME Rate    230%    230%    230%
   Research and development SME payable credit    14.5%    14.5%    14.5%
   Research and development expenditure credit (RDEC) scheme – 12% from 1 January 2018    11%    12%    12%
   Film/High-end TV/ Videogames tax relief     25%    25%    25%
   Open ended investment companies and authorised unit trusts    20%    20%    20%
   Patent Box
   Patent box – note 1    10%    10%    10%
   From 1 April 2017 patent box allows companies to elect to apply a 10% rate of corporation tax to 100% of profits from qualifying patents.
   VAT
   Standard rate    20%    20%    20%
   Reduced rate    5%    5%    5%
   Zero rate    0%    0%    0%
   Flat rate of VAT on gross turnover (For Limited Cost Trader)    16.5%    16.5%    16.5%
   Normal scheme registration threshold    895,000    85,000    85,000
   Deregistration threshold    83,000    83,000    83,000
   Cash accounting scheme -maximum to join    1,350,000     1,350,000    1,350,000
   Cash accounting scheme – exit threshold    1,600,000    1,600,000    1,600,000
   Annual accounting scheme – maximum to join    1,350,000    1,350,000    1,350,000
   Annual accounting scheme – exit threshold    1,600,000    1,600,000    1,600,000
   Flat rate scheme – maximum allowed to join    150,000    150,000    150,000
   Flat rate scheme exit threshold    230,000    230,000    230,000
   Annual Tax on Enveloped Dwellings (ATED)
   More than £0.5m but not more than £1m    3,500    3,600    3,650
   More than £1m but not more than £2m    7,050    7,250    7,400
   More than £2m but not more than £5m    23,550    24,250    24,800
   More than £5m but not more than £10m    54,450    56,550    57,900
   More than £10m but not more than £20m    109,050    113,400    116,100
   More than £20m    218,200    226,950    232,350

 

ACCA LEGAL NOTICE

This is a basic guide prepared by ACCA UK‘s Technical Advisory Service for members and their clients. It should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.