Income tax & NIC

 

Income Taxes and National Insurance

The Chancellor announced that, in line with their commitment to increase the Personal Allowance to £12,500 and the higher rate threshold to £50,000, they will raise the income tax bands to the following:

  • The Personal Allowance will increase to £11,850 from April 2018
  • The higher rate threshold will increase to £46,350 from April 2018.

The increase in the Personal Allowance is an increase of 3%, which, while welcome, is a fairly standard increase based on CPI. This will result in an income tax reduction of up to £70 per annum for basic rate taxpayers and up to £340 per annum for higher rate taxpayers earning under £100,000 (not taking into account any other impacts).
 

The 0% starting rate band for savings will remain at its current value of £5,000 for 2018/19.
 

The National Insurance rate bands have also increased slightly – for example, the lower profits limit for Class 4 contributions for the self employed will rise from £8,164 to £8,424 from April 2018. Class 2 NICs will not be abolished until April 2019.

Double up on your EIS Investments

As part of his Budget speech today the Chancellor, Philip Hammond, announced plans to further encourage new tech businesses. Together with the promise of over £500million of investment in a range of initiatives such as 5G, full fibre broadband and Artificial Intelligence he published an ‘Action Plan’ to unlock over £20 billion of new investment in UK scale-up businesses.

Part of this ‘Action Plan’ is to double Enterprise Investment Scheme (EIS) limits for, what he termed as ‘knowledge-intensive companies’. However, while the limit will be doubled for investment in this specific type of company, measures will be taken to ensure that EIS is not used as a shelter for low-risk asset backed investments.  

Currently, the maximum investment limit in EIS for which Tax relief is available is £1million, attracting a 30% Income Tax relief and a Capital Gains Tax deferral, if applicable, on investment. Any capital gains made on the EIS shares are also free of Capital Gains Tax if the investment has been held for at least three years.  This measure will increase the annual limit for individuals investing in EIS, including in knowledge-intensive companies, to £2million provided that anything above £1million is invested in the knowledge-intensive companies.

The annual EIS and VCT limit on the amount of tax-advantaged investments a knowledge-intensive company may receive will be increased to £10 million.

The changes for EIS will apply to shares issued on or after 6 April 2018. For VCTs, the changes will apply to new qualifying investments made on or after 6 April 2018.

Our handy Tax Facts Pocket Guide provides you with the rates and figures you need to manage your personal and business finances.

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