Guide to Tax Rates and Allowances 2018

The message from the Chancellor was that ‘this is a budget that shows the British people that the hard work is paying off.’

This is a basic guide to tax rates and allowances. It is an introduction only and should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.

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 Above150,000 Above150,000
Notes on changes to the Welsh tax system from 6 April 2019 Budget date 18/12/18
1 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.

2 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 increase will be indexed with the CPI.

Income tax rates – (dividend income new rules from 6/4/2016)  2018/19  2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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
Micro entrepreneurs 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
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 marry or register 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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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): 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 investment 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 2017/18 2018/19 2019/20
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 2017/18 2018/19 2019/20
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 85,000 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) 2017/18 2018/19 2019/20
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.

 

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