New tax changes from April 2018

This is the time of year when HMRC implement the changes introduced by the latest budget from the Chancellor of the Exchequer. Here are the main changes, which took effect from 6th April 2018.

1) The personal allowance has increased to £11,850. So the first £11,850 of your income is tax free. However, you may still have National Insurance to pay if you’re an employee or a sole trader or partner in a partnership. The first £8,424 of your income attracts no National Insurance.

2) The tax free dividend allowance has decreased to £2,000, therefore if you earn a low salary and receive the rest of your income in dividends, then you will pay tax once your personal income exceeds £13,850.

This decrease in the dividend allowance will mean that you will pay additional tax of £225, compared to 2017/18.

3) The threshold for paying the higher rate of tax has increased to £46,350.

4) The Capital Gains Tax exempt amount has increased to £11,700.

5) The National Living wage has increased to £7.83 per hour, for 25 year olds and over.

6) The threshold at which graduates begin to pay back their student loans has increased. For Plan 1 loans the threshold is £18,330, and Plan 2 loans it has increased to £25,000.