Tax Rates and Allowances

Personal tax rates

Personal Allowance

	2017 / 18	2018 / 19
Personal Allowance – The amount of salary you can take tax-free every year.	£11,500	£11,850
Income limit for Personal Allowance –The level of earnings at which the Personal Allowance reduces. For each £2 in earnings above £100,000, you lose £1 of Personal Allowance.	£100,000	£100,000

In 2018/19, you don’t receive any personal allowance when you earn over £123,700 (2017/18 equivalent is £123,000).

Income Tax

Note: The rates below do not include the Personal Allowance above.

	2017 / 18	2018 / 19
Basic rate – The lowest level of income tax.	20% on earnings up to £33,500	20% on earnings up to £34,500
Higher rate – The middle tier of income tax.	40% on earnings above the basic rate up to £150,000	40% on earnings above the basic rate up to £150,000
Additional rate – The top rate of income tax for high earners.	45% on earnings above £150,000	45% on earnings above £150,0001

for 2018/19, there are different income tax rates for Scottish residents

Scottish Income Tax Bands

Scottish Bands	Band name	Scottish Rate
Over £11,850 – £13,850	Starter	19%
Over £13,850 – £24,000	Basic	20%
Over £24,000 – £44,273	Intermediate	21%
Over £44,273 – £150,000	Higher	41%
Above £150,000	Top	46%

Assumes individuals are in receipt of the Standard UK Personal Allowance.

Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

Dividend taxes

Note: The rates below do not include the Personal Allowance.

	2017 / 18	2018 / 19
Dividend tax-free allowance	£5,000	£2000
Dividend ordinary rate – The lowest rate of tax on dividends	7.5% on earnings up to £33,500	7.5% on earnings up to £34,500
Dividend upper rate – The middle tier of tax on dividends.	32.5% on earnings above the basic rate up to £150,000	32.5% on earnings above the basic rate up to £150,000
Dividend additional rate –The top rate of income tax for high earners.	38.1% on earnings above £150,000	38.1% on earnings above £150,000

National Insurance

National Insurance bands and rates are some of the most confusing around – not least because everything is different for employees, sole traders and limited company directors. National Insurance contributions are usually calculated weekly, rather than annually. We’ve included both here.

Employee National Insurance contributions

	2017 / 18		2018 / 19
	Weekly	Annually	Weekly	Annually
Lower earnings limit – Earnings below this limit will incur no NICs	£113	£5,876	£116	£6,032
Primary threshold – Earnings below this limit will incur no NICs	£157	£8,164	£162	£8,424
Upper earnings limit – Earnings above the Primary threshold and below the Upper earnings limit will be taxed at 12%.	£866	£892	£45,000	£46,350

Employer National Insurance contributions

	2017 / 18		2018 / 19
	Weekly	Annually	Weekly	Annually
Secondary threshold – Income above this threshold will incur Employer NICs at 13.8%.	£157	£8,164	£162	£8,424

Any earnings above the Upper earnings limit are taxed at 2%

Self-employed National Insurance contributions

	2017 / 18	2018 / 19
Small profits threshold – Earnings below this threshold incur no NICs.	£6,025	£6,205
Class 2 NICs – for those earning above the Small profits threshold	£2.85 per week	£2.95 per week
Lower profits limit – Earnings up to this limit incur only Class 2 NICs. Over this limit incurs Class 4 NICs.	£8,164	£8,424
Upper profits limit – Earnings up to this limit incur: Class 2 NICs Class 4 NICs at 9% of the profit between the Lower profits limit and Upper profits limit.	£45,000	£46,350
Earnings above the Upper profits limit Any earnings above this limit incur: • Class 2 NICs • Class 4 NICs at 9% of the profit between the Lower profits limit and Upper profits limit • Class 4 NICs at 2% of the profit above the Upper profits limit.	Over £45,000	Over £46,350

Capital Gains Tax

Capital Gains Tax is a tax on the profit made when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive. The tax rate you use depends on the total amount of your taxable income. There are complex rules around Capital Gains Tax so if you need more help please contact us.

		2017 / 18	2018 / 19
Annual exemption from capital gains		£11,300	£11,700
As a basic ratetaxpayer	Gains from other residential property	18%	18%
	Gains from other residential property	10%	10%
As a higher ratetaxpayer	Gains from other chargeable assets	28%	28%
	Gains from other residential property	20%	20%
Entrepreneurs’ Relief		10%	10%

Company tax rates

Corporation Tax

	2017 / 18	2018 / 19
Small profits rate – For companies with profits up to £300,000	19%	19%
Main rate – For companies with profits above £300,000	19%	19%

VAT Registration

	2017 / 18	2018 / 19
VAT Registration threshold – The level of revenue at which you must register for VAT	£85,000	£85,000

General VAT rates

	2017 / 18	2018 / 19
Standard – The VAT rate applicable to most goods and services	20%	20%
Reduced rate – A lower rate applicable to certain goods and services	5%	5%
Zero rate – A rate applied to some goods and services (food, children’s clothes etc.). Note: this is not the same as items which are exempt from VAT	0%	0%

Flat Rate VAT scheme sector rates

If you decide to use the Flat Rate VAT scheme (available to those with revenue of £150,000 or less) you must choose a business sector and use the applicable rate for all transactions where VAT applies. If you are unsure which sector you fit into, speak to an accountant.

If turnover (inclusive of VAT) exceed £230,000 per annum you can no longer use the Flat Rate scheme.

Remember if you’re a Limited cost trader you must use the 16.5% rate regardless of the business sector.

Type of business	2018/19 flat rate (%)
Accountancy or bookkeeping	14.5
Advertising	11
Agricultural services	11
Any other activity not listed elsewhere	12
Architect, civil and structural engineer or surveyor	14.5
Boarding or care of animals	12
Business services not listed elsewhere	12
Catering services including restaurants and takeaways	12.5
Computer and IT consultancy or data processing	14.5
Computer repair services	10.5
Entertainment or journalism	12.5
Estate agency or property management services	12
Farming or agriculture not listed elsewhere	6.5
Film, radio, television or video production	13
Financial services	13.5
Forestry or fishing	10.5
General building or construction services	9.5
Hairdressing or other beauty treatment services	13
Hiring or renting goods	9.5
Hotel or accommodation	10.5
Investigation or security	12
Labour-only building or construction services	14.5
Laundry or dry-cleaning services	12
Lawyer or legal services	14.5
Library, archive, museum or other cultural activity	9.5
Limited cost trader	16.5
Management consultancy	14
Manufacturing fabricated metal products	10.5
Manufacturing food	9
Manufacturing not listed elsewhere	9.5
Manufacturing yarn, textiles or clothing	9
Membership organisation	8
Mining or quarrying	10
Packaging	9
Photography	11
Post offices	5
Printing	8.5
Publishing	11
Pubs	6.5
Real estate activity not listed elsewhere	14
Repairing personal or household goods	10
Repairing vehicles	8.5
Retailing food, confectionary, tobacco, newspapers or children’s clothing	4
Retailing pharmaceuticals, medical goods, cosmetics or toiletries	8
Retailing not listed elsewhere	7.5
Retailing vehicles or fuel	6.5
Secretarial services	13
Social work	11
Sport or recreation	8.5
Transport or storage, including couriers, freight, removals and taxis	10
Travel agency	10.5
Veterinary medicine	11
Waste or scrap dealing	10.5
Wholesaling agricultural products	8
Wholesaling food	7.5
Wholesaling not listed elsewhere	8.5

Mileage Allowances

HMRC’s approved mileage allowance payments (sometimes called AMAP) allow business mileage to be claimed as expenses at specific rates. The rates for 2017 / 18 are:

	First 10,000 miles	Over 10,000 miles
Car / van	£0.45	£0.25
Motorcycle	£0.24	£0.24
Bicycle	£0.20	£0.20

Director Loan Rate

	2017/18 and no change in 2018/19
If loaned amount exceeds £10,000 at any point during the year	2.5% nominal interest on the whole amount plus Class 1A National Insurance contributions (13.8%), and may need to be reported on your P11D