Personal tax update for the 2018/19 Tax Year

April 30th 2018

Other than a significant shift in the complexity of income taxes in Scotland there is little change to the personal taxes the affect savers and investors.

Income Tax

The Personal Allowance (the level at which people can earn before paying the 20% basic rate of tax) will increase from £11,500 to £11,850.  The threshold at which higher rate tax (40%) is payable will increase from £45,000 to £46,350. These thresholds are due to increase further over the next few years to £12,500 and £50,000 respectively.

In Scotland, Income Tax was officially devolved to Holyrood on 30 November 2016 and the Scottish Executive’s new plans for income tax come into effect in the 2018/19 tax year.  More details are here:-

Scottish Rates of Income Tax from April 2018

Capital Gains Tax

The Annual Exemption has increased from £11,300 to £11,700.  There is no change to CGT rates, namely 10% for basic rate tax payers and 20% for higher rate tax payers with sellers of residential investment property continuing to pay an additional 8% surcharge.

Inheritance Tax

There is no major change other than a planned increase in the Residence Nil Rate Band (RNRB) which was phased in from April 2017.

This band can be inherited by a surviving spouse or civil partner and is in addition to the £325,000 existing NRB.  This means that from 2020 it could be possible for a couple to leave up to £1 million of assets to their children without paying Inheritance Tax.

Tax Year                 Standard NRB                 Residence Nil Rate Band               Total NRB

2018/19                 £325,000                          £125,000                                           £450,000

2019/20                 £325,000                          £150,000                                           £475,000

2020/21                 £325,000                          £175,000                                           £500,000

Pensions

Personal Pensions remain unchanged, but the minimum contributions to a qualifying Auto Enrolment Workplace Pension Scheme that both employees and employers make will increase in the 2018/19 tax year and again in the 2019/20 tax year.

Tax Year                                           Employer                          Employee                        Total

Up to April 2018                              1%                                        1%                                       2%

2018/19                                             2%                                        3%                                       3%

2019/20                                             3%                                        5%                                       8%

 

Tax Efficient Investments

The annual investment limit for Enterprise Investment Schemes (EIS) increases to from £1 million to £2 million provided that any amount above £1 million is invested in knowledge-intensive companies.  EIS schemes can secure income tax relief at 30%, the relief can be carried back the previous year, and unlimited Capital Gains Tax deferral is available.

Hugo Cannon 3

Hugo Cannon

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