There are bad times just around the corner...
As the new tax year starts, here is a brief round up of current changes to taxes and the National Minumim Wage.
Income tax and National Insurance
The personal allowance has increases £12,500 (from £11,850). In Scotland, the higher rate band remains at £43,430. For the rent of the UK the higher-rate tax band has increased to £50,000 (£46,350). That means someone earning £50,000 is paying £1,544 more a year in Scotland.
National insurance contributions have risen to 12 per cent on earnings between £46,350 and £50,000.
National minimum wage
The national minimum wage has been around for 20 years now. A 5% increase took effect on 1 April. Welcomed by employees, but another worry for employers. The hourly rate now starts at £3.90 per hour for new apprentices, rising to £8.21 per hour for workers aged over 25, the national living wage.
Take care to understand what constitutes “working time”, the effect of salary sacrifice and deductions for workwear etc., or as Iceland recently found out to its cost – even a Christmas savings scheme. HMRC punishes “technical breaches” with an uncompromising hard line.
Capital gains tax
The capital gains tax annual exemption has risen to £12,000 (£11,700) from 6th April. Above this amount, lower-rate taxpayers pay 10 per cent on capital gains, while higher and additional rate taxpayers pay 20 per cent.
People selling second properties, including buy-to-let landlords, pay CGT at 18 per cent if they are a basic rate taxpayer or 28 per cent if a higher or additional rate taxpayer.
CGT for non-UK residents has been extended to include all disposals of UK property, and further changes are likely. If you have multiple properties, consider the potential consequences now!
The 40 per cent inheritance tax rate continues to apply from £325,000. However the residence nil-rate band has increased to £150,000 (£125,000). This allowance is added to the basic tax-free £325,000 to allow people to leave property to direct descendants such as children and grandchildren. The allowance is then reduced by £1 for every £2 that the value of the estate exceeds £2m.
The state pension has risen by 2.6 per cent — the weekly amounts for old basic state pension rising to £129.20 (£125.95) and for the new state pension to £168.60 (£164.35) a week.
The auto-enrolment workplace pensions have increased from 5 per cent (with at least 2 per cent from the employer) to 8 per cent (with at least 3 per cent coming from the employer).
The pension lifetime allowance has increased to £1,055,000 (£1,030,000) from April 6, in line with consumer price index inflation. However, the overall annual allowance stays at £40,000, and continues to be tapered down to £10,000 for those with a yearly income above £150,000.
There are bad times just around the corner,
There are dark clouds hurtling through the sky
And it's no good whining
About a silver lining
For we know from experience that they won't roll by,
With a scowl and a frown
We'll keep our peckers down
And prepare for depression and doom and dread,
We're going to unpack our troubles from our old kit bag
And wait until we drop down dead.