Welcome to 2018:
Personal tax season is upon us, once again!
For those who are self-employed, earning income through dividends, rent or investments and other businesses, self-assessment season has a nasty habit of sneaking up on us. One minute we are getting ready to wind down for the holiday’s, next minute, there’s a tax bill looming.
In most accountants, this is a time of panic and rushing around submitting files to HMRC.
Thankfully, this isn’t this case at Equate. We take a proactive approach to self-assessment tax management, to ensure submissions are sent in advance and clients know exactly what they need to pay, and when. If you’re unsure, or haven't noted it down: the deadline to pay HMRC is 31 January. Please remember that HMRC are no longer accepting credit card payments from 13th January 2018.
Any changes to self-assessment tax bands and rates are usually announced in a previous budget. Now that the Spring Budget is the primary fiscal event in the UK tax season, we can expect any changes to the 2018/19 or 2019/20 HMRC guidelines announced in the next budget.
Changes affecting the 2016/17 submissions
At present, in the previous tax year (2016/17 - due on 31 January 2018), the tax free dividend rate is still £5,000 (over and above your personal allowance). In 2017/18 (the current tax year), this has reduced to £2,000.
In 2016/17, your standard Personal Allowance was £11,000. Anything else you earn is either a dividend or another form of income, taxed at a different rate; and payable soon! This was increased £500 for the current tax year and is set to increase further for the next (2018/19).
The higher tax rate was set at £43,000, which means those who earn dividends have a tax free allowance of £11,000, plus £5,000 worth of dividends, before paying the basic rate at 7.5%. Income above £43,000 means paying a rate of 32.5%.
Marriage allowance went up, which can help higher earners. Those in a marriage who are earning more can reduce their tax bills slightly - if they transfer tax allowances £1,100 (exactly - not more or less) to their spouse during the tax year. Please note: The higher earner of the two spouses needs to be a basic rate tax payer to qualify so the maximum saving is £220 for the year.
Rental property owners were forced to pay more stamp duty this tax year, which should be noted on the tax return (if you bought a rental property in 2016/17). At the same time, you need to keep receipts if any work has been done on a property, to receive wear and tear allowance. Previously, you could reduce tax slightly when an automatic deduction of 10% was allowed to account for wear and tear on properties.
In that tax year, anyone who earns income from interest payments can benefit from relief on the first £1,000 as a basic rate payer. Higher rate payers only have a £500 tax relief amount.
Capital Gains Tax (CGT) reduced in 2016/17, from 20 to 10% for basic rate payers, and from 28 to 18% for higher rate payers. However, on residential property, this remained unchanged, at 18% for basic and 28% for higher rate payers. The allowance remained the same, at £11,100.
Remember, always speak to your accountant for individual tax advice.
If you’ve not sent in a submission yet: Get in contact. We can help get your tax affairs in order.
Disclaimer: We hope you enjoyed this article and found the information contained within useful. Please remember that this is an article and is no substitute for professional advice on taxes or your business or personal finances. For more information on accountancy services from Equate, please see our website: http://www.equateltd.co.uk/