Personal tax update for the 2018/19 Tax Year

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.