Just a few days into the new tax year it is worth considering what general changes have come into effect and what that might mean for individuals and businesses.
Increase in employers’ minimum auto-enrolment contributions
Up to 5 April 2018 the pension auto-enrolment legislation required employers to contribute at least 1% on qualifying earnings. From 6 April 2018, employers may be required to increase the contribution they pay into their automatic enrolment workplace pension scheme. Affected employers will be required to pay a minimum of 2% from this time, with a further increase to 3% set to take place from 6 April 2019.
Rising National Living Wage (NLW) and National Minimum Wage (NMW) rates
From 1 April 2018, the NLW for employees aged 25 and over will increase to £7.83 per hour.
Meanwhile, the NMW will increase to £7.38 per hour for workers aged 21-24, and to £5.90 an hour for workers aged 18-20. For workers who are aged 16-17, the NMW will rise to £4.20 per hour, and for apprentices, the rate will rise to £3.70 an hour. An apprentice is an individual who is aged under 19, or 19 and over and in the first year of their apprenticeship.
Businesses should consider the impact of these increases on their cash flows and the penalties for not enacting these changes promptly can be significant.
Reduction in the Dividend Allowance
The Dividend Allowance is set to reduce to £2,000 on 6 April 2018, from its previous level of £5,000.
Changes in Scotland and Wales
April 2018 also sees some significant changes for individuals and businesses within Scotland or English businesses with activities in these parts of the UK;
1. Introduction of the new Welsh Land Transaction Tax (LTT)
1 April sees the introduction of the new LTT, which preserves the essential structure of Stamp Duty Land Tax (SDLT), but with some key differences, including a higher starting threshold for residential properties. For those seeking to purchase a residential property in Wales, there will be no tax to pay on a home worth up to £180,000.
2. Scottish changes
From 6 April 2018, a raft of additional changes will take effect for taxpayers who are resident in Scotland. Key amongst them are:
- the introduction of two new income tax bands, bringing the possible income tax rates payable up to five. The new Scottish income tax rates range from 19% to 46%.
- Keeping the rates for the Scottish equivalent of SDLT the same, meaning that tax becomes payable on residential property transactions above £145,000. However, a new first time buyer relief is being brought in from April 2018 to exempt the first £175,000.
For further details on any of these changes or how they may impact on you, please contact your usual Thomas Westcott contact.
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