The new tax year began on Friday with a bigger than usual set of changes to income taxes, personal allowances, pensions, buy-to-let taxation and dividend taxation. Here’s what to expect.
Personal allowance
The amount you can earn without paying income tax rises from £11,500 to £11,850, which works out as a tax cut of £70 for most people.
Income tax
The starting point for paying 20% basic rate tax will be £11,850, while 40% tax will start on earnings above £46,350 (up from £45,000).
Scotland
It’s different in Scotland. The £11,850 personal allowance is the same, but the first £2,000 of earnings after that are taxed at 19% rather than 20%. After that, it’s 20% tax until your earnings hit £24,000, when it rises to 21%. Then above £43,430 the rate is 41%. Both have an upper rate above £150,000; in England it’s 45%, in Scotland 46%.
National insurance
Will be charged at 12% of income on earnings above £8,424, up from £8,164 until you are earning more than £46,350, after which the rate drops to 2%. It’s the same in Scotland.
Auto-enrolment
Auto-enrolment Pension contributions start racking up from this week. From Friday workers must pay a minimum of 3% of salary into a pension (up from 1%), while the employer contribution rises from 1% to 2%.
Buy-to-let landlords
Will only be able to offset 50% of their mortgage interest when calculating their tax bill, compared with 75% before.
Dividends
Until now you could earn £5,000 in dividends tax-free. This drops to £2,000 for 2018-19.
Source: https://www.theguardian.com/money/2018/apr/06/welcome-to-the-new-tax-year-heres-the-main-changes