Knowledge

Tax rates, thresholds, and allowances for 2018/19

Posted on Mar 1st, 2018 | Tax

The UK has many different tax rates affecting both individuals and businesses – and as a business owner, you’ll be affected by many of them.

As well as the actual tax rates, your finances could be affected by the shifting of tax bands and allowances – working out your income can be tricky with a tax system as complex as the UK’s! Check out our take home pay calculator to get a quick answer.

Tax rates and thresholds for the 2017/18 and 2018/19 tax years are shown below. We’ve split them into Personal and Company tax rates – you can use the links to jump to the relevant section.

Personal tax rates

Company tax rates

 

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.

 

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

£100,000 £100,000

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Income Tax

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

2017 / 18 2018 / 191
Basic rate – The lowest level of income tax. 20% on earnings up to £33,500 20% on earnings up to £34,5001
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 £150,0001
Additional rate – The top rate of income tax for high earners. 45% on earnings above £150,000 45% on earnings above £150,0001

1for 2018/19, there are different income tax rates for Scottish residents

Scottish Income Tax Bands

Scottish Bands Band name Scottish Rate
Over £11,8501 – £13,850 Starter 19%
Over £13,850 – £24,000 Basic 20%
Over £24,000 – £44,273 Intermediate 21%
Over £44,273 – £150,0002 Higher 41%
Above £150,0002 Top 46%

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

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

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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

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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 £45,000 £892 £46,350
Any earnings above the Upper earnings limit are taxed at 2%

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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

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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

 

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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. Read our article What is Capital Gains Tax for more information. There are complex rules around Capital Gains Tax so if you need more help please speak with an accountant.

 

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

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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%

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VAT Registration

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

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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%

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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

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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

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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

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