We are approaching the 2018/19 tax year and hence new tax rates and rules will be coming into force. From 6 April 2018 our individual personal allowance (amount each person can earn tax free) will increase to £11,850 per year (£988 per month; £288 per week).
Earnings up to the basic rate tax band of £34,500 are taxed at 20%, earnings which fall between £34,501 and £150,000 are taxed at the higher rate band of 40%. Earnings over £150,000 are taxed at the additional tax rate of 45%.
As an employee the amount you can earn before Class 1 National Insurance is deducted has increased to £8,424 per year (£702 per month; £162 per week) for 2018/19. Once you have earnt above the threshold, deductions will be taken at a rate of 12%.
Student loan deductions are taken at a rate of 9% once you are earning £18,330 per year (£1,527 per month; £352 per week) if you are on Plan 1 or £25,000 (£2.083 per month; £480 per week) if you are on Plan 2.
The annual exemption for individuals for Capital Gains Tax (CGT) has increased to £11,700 whilst the standard rate of CGT has remained as last year: 10% if the gains are within the basic rate band and 20% if they fall within the higher rate band. However, it is also worth noting that the rates for gains on residential property not eligible for Private Residence Relief are 18% within the basic rate band and 28% in the higher rate band.
Inheritance tax remains at 40% for estates which exceed the nil rate band of £325,000 and additional residence nil rate band of £125,000. There is a reduced rate of 36% for estates in which 10% or more has been left to charity.
With most other thresholds increasing it is disappointing that the tax free dividend threshold falls to just £2,000 from 6 April 2018. Any remaining dividends within the basic rate band are taxed at 7.5%. Dividends falling within the higher rate band will now be taxed at 32.5% and any that fall into the additional rate are taxable at 38.1%.