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Spring Statement Update And Contractor Specific Tax Tables For Financial Year 2018/19

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    No Red suitcase, no smiling for the camera and no pageantry in yesterday’s spring statement from the chancellor, Philip Hammond.

    There were quite a few news articles circulated online suggesting Chancellor might be extending Public sector IR35 reforms to private sector before his statement. This wasn’t the case and the Chancellor instead stated “We are the party of small business and the champion of the entrepreneur”.

    So for the moment Contractors and freelancers can breathe sigh of relief. We sincerely hope the Chancellor – one time contractor, appreciates the contribution independent contractors and freelancers make to UK economy.

    Below are the key takeaways from today’s statement,

    • Forecast of 1.5% growth for 2018 (Revised from 1.4%)
    • Forecast for borrowing of £45.2bn in 2017-18 (Revised £49.9bn)
    • National Debt is forecast to fall
    • Increase in Public spending
    • Address the skills shortage by incentivising Companies to hire students
    • More Housing (215,000 new homes by 2030-31)
    • Use the tax system to drive technological and behavioural change for plastic waste and Air Quality
    • Help to roll out high-speed broadband to local areas
    • How to prevent the use of cash for tax evasion and money laundering.
    • Revamping the VAT process and thresholds

    Except very last point nothing significant to highlight for contractors so we thought will remind about the changes that will happen from 6th April to your tax rates.

    Please note below points

    • Scotland will have different tax rates so be mindful if you are Scottish tax resident
    • Rental income – the Interest allowable will be decreased to 50% so be mindful the impact it will have on your Dividends.
    Personal Allowance

    Personal allowance – the annual amount you can earn before paying tax – rises from £11,500 to £11,850. If your company has two or more Employees/Directors this will be the optimal salary for the year. If you’re company has only one Employee/Director optimal salary will be £8424 which is the NI threshold. Reason behind this is £3,000 employment allowance is not available for single Director companies.

    WIS will send Payroll schedules to you in next couple of days.

    Dividend Allowance

    Dividend allowance will be reduce to £2,000 from  6th April 2018

    Higher Tax threshold

    The starting point for paying the higher rate of tax (40% / 32.5% for Dividends) will move from £45,000 to £46,350 in England and Wales. However, in Scotland the higher rate threshold will be £44,273. Scotland will also have additional tax brackets for Starter rate and Intermediate rates. Details of this can be seen on the table.

    Corporation Tax

    Corporation Tax rate will at 19%

    Buy-to-lets

    Mortgage interest deduction will be 50% from 6th April 2018.

    Detailed Tax tables for both England and Wales and Scotland are below

    Table 1 – England and Wales

    Band/CategoryTax rateTaxable income
    2017/18 (UK – except Scotland)2018/19 (UK – except Scotland)
    Personal Allowance0%Up to £11,500Up to £11,850
    Basic rate20%£11,501 to £45,000£11,851 to £46,350
    Higher rate40%£45,001 to £150,000£46,351 to £150,000
    Additional rate45%over £150,000over £150,000
    Dividend Allowance0%£5,000£2,000
    Basic rate7.50%Upto £45,000Upto £46,350
    Higher rate32.50%£45,001 to £150,000£46,351 to £150,000
    Additional rate38.10%over £150,000over £150,000
    NI Threshold£157 pw£162 pw
    Employer NI Allowance (Provided more than 1 employee)£3,000£3,000
    Monthly NET Salary (More than 1 employee)£925£953
    Monthly NET Salary (1 employee)£680£702
    Tax free savings accounts
    Individual Savings Account (ISA) subscription limit£20,000£20,000
    Junior ISA subscription limit£4,128£4,260
    Child Trust Fund (CTF) subscription limit£4,128£4,260
    Corporation Tax19%19%

    Table 2 – Scotland

    Band/CategoryTax rateTaxable income
    2017/18 (Scotland)2018/19 (Scotland)
    Personal Allowance0%Up to £11,500Up to £11,850
    Starter Rate19%N/A£11,851 to £13,850
    Basic rate20%£11,501 to £43,000£13,851 to £24,000
    Intermediate Rate21%N/A£24,001 to £44,273
    Higher rate41% (+1%)£43,001 to £150,000£44,274 to £150,000
    Top rate46% (+1%)over £150,000Over £150,000
    Dividend Allowance0%£5,000£2,000
    Basic rate7.50%Upto £43,000Upto £44,273
    Higher rate32.50%£43,001 to £150,000£44,274 to £150,000
    Additional rate38.10%over £150,000over £150,000
    NI Threshold£157 pw£162 pw
    Employer NI Allowance (Provided more than 1 employee)£3,000£3,000
    Monthly NET Salary (More than 1 employee)£925£953
    Monthly NET Salary (1 employee)£680£702
    Tax free savings accounts
    Individual Savings Account (ISA) subscription limit£20,000£20,000
    Junior ISA subscription limit£4,128£4,260
    Child Trust Fund (CTF) subscription limit£4,128£4,260
    Corporation Tax19%19%

    If you have any questions please do not hesitate to contact us on 020 301 11898

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