The new tax year started on 6 April, introducing lots of changes and opportunities. Here’s a handy reminder of three major aspects introduced on 6 April this year:
1. Higher earnings
National Insurance Contribution (NIC) cuts offer an indirect rise in employees’ wages. Class 1 employee NIC is reduced from 10% to 8%, involving a cut of 2p in every pound. This saves the average worker on £35,400 over £900 a year.
For the self employed, Class 4 NIC is decreased by 2%, from 8% to 6% and Class 2 NIC is abolished. The average self-employed person on £28,000 is set to save over £650 a year.
Both National Minimum Wage and the National Living Wage increased this month (from 1 April). In addition, NLW now includes employees aged 21 and over (previously aged 23 and over).
Please note that thresholds for income tax have not changed, remaining at £12,570 basic rate and £50,271 higher rate. This means that more taxpayers are likely to face higher rate tax, with over a million expected to incur 40% tax charges for the first time.
2. Lower allowances
The big news for owner-managed businesses is another cut (50%) in the dividend allowance, now just £500pa. (Just two years ago, the dividend allowance was £2,000.) An estimated 4.4m taxpayers are likely to be affected.
The annual exempt allowance for capital gains tax (CGT) is also halved, now £3,000pa. (Another huge decrease from two years ago when this allowance was £12,300.)
For residential property sales, there’s a new CGT rate of 24% for higher rate taxpayers. The standard rate of 18% remains in place.
3. More child benefit – available to more parents
The high income child benefit charge (HICBC) now applies from income of £60,000pa, previously £50,000. This involves a 1% charge on child benefit for every £200 of income that exceeds £60,000. If income exceeds £80,000, the charge is equal to the amount of the child benefit payment.
Significant changes to statutory paternal leave and pay are also in place – see our article for more details.
How do these changes affect you?
From tax planning to payroll, the re:accounts team has your back. We’ll make sure your employees are paid the right amount and on time and we love to save you money by minimising your tax bill. Let’s find out how we can save you time, stress … and money! Contact us for an initial chat and a great coffee, without obligation.
