Personal and business tax changes for the new tax year starting on 6th April 2025
By Tom West - on 26 March 2025
Personal Tax, thresholds and allowances
The Personal Allowance (the amount you can earn before paying any Income Tax) remains at £12,570 for the 2025/26 and 2024/25 tax years. The threshold for paying the Higher Rate of income tax (which is 40%) remains at £50,270. Both of these thresholds are frozen until 2026.
Tax rates and thresholds for the UK (excluding Scotland)
There have been changes to thresholds in the UK and also different changes for Scotland:
| Tax Year | 2025/26 | 2024/25 |
|---|---|---|
| Tax Band name | -------------------------Tax Rate, tax bands and tax thresholds------------------------- | |
| Basic rate tax - The lowest level of Income Tax paid above the Personal Allowance. | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) |
| Higher rate tax - The middle tier of Income Tax. | 40% on income between £50,271 and £125,140 | 40% on income between £50,271 and £125,140 |
| Additional rate tax - The top rate of Income Tax for high earners. | 45% on income above £125,140 | 45% on income above £125,140 |
There are different Income Tax rates for Scottish residents
Scottish Income Tax Rates and Tax Thresholds
The Scottish Government operates a different income tax regime compared to the rest of the UK, with a lower starter rate and more tax bands and tax thresholds.
| Tax Year | 2025/26 | 2024/25 | |
|---|---|---|---|
| Tax Band name | Tax Rate | ---------Tax Bands and Thresholds--------- | |
| Starter rate | 19% | £12,571* - £15,397 | £12,571* - £14,876 |
| Basic rate | 20% | £15,398 - £27,491 | £14,877 - £26,561 |
| Intermediate | 21% | £27,492 - £43,662 | £26,562 - £43,662 |
| Higher rate | 42% | £43,663 - £75,000 | £43,663 - £75,000 |
| Advanced rate | 45% | £75,001 - £125,140 | £75,001 - £125,140 |
| Top rate | 48% | Over £125,140 | Over £125,140 |
The above tables assume the individual is receiving the Personal Allowance for tax-free income of £12,570 in the 2025/26 and 2024/25 tax years. The Personal Allowance is reduced by £1 for every £2 earned over £100,000. This is the same across the UK. There’s more background to the Scottish Income Tax rates and how to see if you’re classed as a Scottish taxpayer in our ‘Scottish Income Tax Rates and how to check if it applies to you’ knowledge article.
Impact on director tax-efficient salary recommendations
To make the most of your tax efficiency as a Director and Shareholder, we usually recommend taking a monthly salary up to the National Insurance (NI) Secondary threshold: £1,048 per month (or £12,570 per year) for the 2025/26 tax year, or £758.33 per month (or £9,100 per year) for the 2024/25 tax year. By combining this salary with dividends in our article, "What are dividends and what taxes do I pay on them?".
As the Lower Earnings Limit is below the point where you pay employee or employer NICs, you will still build up qualifying years for the state pension.
If you pay yourself a salary up to the relevant National Insurance threshold from your limited company, you won’t pay any Income Tax or National Insurance as long as it’s your only income. This is usually the most tax-efficient option. You can also check your National Insurance contributions using our free calculator.
As a company director, you can decide how much salary to pay yourself, but it’s a good idea to get advice from one of our expert accountants to make sure you’re paying yourself in the most tax-efficient way.
Dividend Allowance
The Tax-Free Dividend Allowance for the 2025/26 and 2024/25 tax year is £500. Here are the dividend tax rates, thresholds and allowances:
| Tax band | 2025/26 rates | 2024/25 rates |
|---|---|---|
| Basic Rate | 8.75% | 8.75% |
| Higher Rate | 33.75% | 33.75% |
| Additional Rate | 39.35% | 39.35% |
You can find out more about dividends and what tax you pay in our Knowledge article.
National Minimum Wage and National Living Wage
Whilst not strictly a tax year change, National Minimum Wage and National Living Wage amounts increased in 2025 to £12.21 for over 21's, £10 for 18-20 and £7.55 for under 18's.
Company vehicles - Benefit in Kind
When your company pays for fuel you have used personally or allows personal use of a company van, it is a benefit kind (BiK). These fuel benefit charges only apply if fuel is provided for personal use.
A Company car
As a company car is seen as a BIK, it is taxable as part of your overall income. The cash value of the company car, aka the BIK, is used to calculate the amount of ‘company car tax’ you pay. So, if you have a more expensive company car, you will pay more tax. BIK can be up to 37% for diesel and petrol cars. You can learn more about how company car tax is calculated in our dedicated guide.
The government is keen for more businesses to offer electric company cars. As a result, there is a tax benefit to having an electric company car if you meet certain criteria. The BIK charge on electric vehicles is far lower than traditional cars at just 2%, and this will stay fixed until at least 2025.
Student Loans
Student Loan Plan 1 and Plan 2 threshold increase and new Plan 4 repayments for Scottish Loans
The following tables show the thresholds to start repaying your student loans. For earlier years, please check HMRC’s website.
| Earnings (before tax and other deductions) | Plan 1 | Plan 2 | Plan 4 |
|---|---|---|---|
| Weekly | £480 | £524 | £603 |
| Monthly | £2,082.50 | £2,274.58 | £2,616 |
| Yearly | £24,990 | £27,295 | £31,395 |
If you’re a director being paid salary and dividends from your company, and you’re paying back a student loan, you must remember the threshold for repayment is based on your total income.
This will apply to all current and future student loans where employers make student loan deductions. So if you run a payroll for any employees who have student loan deductions, you need to ensure you have a record of what type of loan they have, so that the correct deductions are made.
We have an article explaining Student Loan repayments when you’re self employed.
Postgraduate Master’s Loan and Postgraduate Doctoral Loan
A Postgraduate Master’s Loan is a type of loan introduced by the government to help with course fees and living costs while you study a postgraduate master’s course. The repayment of your Postgraduate Loan is treated the same as any other Student Loan and interest is charged from the day you get the first payment. Repayment will be at 6% for students in England and Wales on income above £21,000. The rate is 9% for Scottish and Northern Irish students with income over £18,330 per year.
Other personal tax reliefs and allowances
Higher-income Child benefit charge threshold
Since January 2013, there has been a clawback charge on the higher earner of a couple where one claims Child Benefit and has an income over £60,000. This increased from £50,000 prior to April 6th 2024.
Personal pensions
The lifetime allowance for pension savings remains at £1,073,100 and is frozen until 2026.
Capital Gains Tax
TThe Capital Gains Tax annual exempt amount for individuals is £3,000 for 2025/26 (same for 2024/25).
Inheritance Tax
There is no change to the Inheritance Tax (IHT) nil rate band, the threshold remains at £325,000 and is frozen at that level until 2026.
Business Asset Disposal Relief
The Business Asset Disposal Relief lifetime allowance limit remains capped at £1 million.
Corporation Tax, workplace pensions and allowances
Corporation Tax
Corporation Tax payable on company profits remains at 19%-25% for the 2025/26 and 2024/25 tax year.
Workplace pensions (auto-enrolment)
There are no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension. This means the total amount of employer and employee contributions remains a minimum of 8% of your employee’s qualifying earnings.
| Date effective | Total minimum contribution | Employer minimum contribution | Staff contribute the remainder |
| Current | 8% | 3% | Up to 5% |
Annual Investment Allowance (AIA)
The Annual Investment Allowance of £1 million has been made permanent.
Corporation Tax Relief (‘super deduction’) business investment tax relief and loss relief for businesses
The super-deduction tax relief allows 130 per cent first-year relief on qualifying main rate plant and machinery investments from 1st April 2021 until 31st March 2023 for limited companies.
The government allows trading losses up to £2 million to be carried back one year without restriction. For accounting periods ending between 1st April 2020 and 31st March 2022, this is extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.
Personal and business tax changes for the new tax year starting on 6th April 2023
By Tom West - on 24 March 2023
Personal Tax, thresholds and allowances
The Personal Allowance (the amount you can earn before paying any Income Tax) remains at £12,570 for the 2022/23 and 2023/24 tax years. The threshold for paying the Higher Rate of income tax (which is 40%) remains at £50,270. Both of these thresholds are frozen until 2026.
Tax rates and thresholds for the UK (excluding Scotland)
There have been changes to thresholds in the UK and also different changes for Scotland:
| Tax Year | 2023/24 | 2022/23 |
|---|---|---|
| Tax Band name | -------------------------Tax Rate, tax bands and tax thresholds------------------------- | |
| Basic rate tax - The lowest level of Income Tax paid above the Personal Allowance. | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) |
| Higher rate tax - The middle tier of Income Tax. | 40% on income between £50,271 and £125,140 | 40% on income between £50,271 and £150,000 |
| Additional rate tax - The top rate of Income Tax for high earners. | 45% on income above £125,140 | 45% on income above £150,000 |
There are different Income Tax rates for Scottish residents
Scottish Income Tax Rates and Tax Thresholds
The Scottish Government operates a different income tax regime compared to the rest of the UK, with a lower starter rate and more tax bands and tax thresholds.
| Tax Year | 2023/24 | 2022/23 | |
|---|---|---|---|
| Tax Band name | Tax Rate | ---------Tax Bands and Thresholds--------- | |
| Starter rate | 19% | £12,571* - £14,732 | £12,571* - £14,732 |
| Basic rate | 20% | £14,733 - £25,688 | £14,733 - £25,688 |
| Intermediate | 21% | £25,689 - £43,662 | £25,689 - £43,662 |
| Higher rate | 42% / 41% | £43,663 - £125,140 | £43,663 - £150,000 |
| Additional rate | 47% / 46% | Over £125,140 | Over £150,000 |
The above tables assume the individual is receiving the Personal Allowance for tax-free income of £12,570 in the 2022/23 and 2023/24 tax years. The Personal Allowance is reduced by £1 for every £2 earned over £100,000. This is the same across the UK. There’s more background to the Scottish Income Tax rates and how to see if you’re classed as a Scottish taxpayer in our ‘Scottish Income Tax Rates and how to check if it applies to you’ knowledge article.
Impact on director tax-efficient salary recommendations
To maximise your tax efficiency as a single company Director and Shareholder in the 2023/24 tax year, we usually recommend your company should pay you a salary of £9,100 and dividends of up to £41,170.
This allows you to use all of the basic rate band of tax, where you pay tax at 20%, and assumes you have no other income. Your total personal tax bill would then be £3,211.25, on take-home pay of £47,058.75.
If you take more income in dividends you will pay tax on these at a rate of 33.75% as a higher rate taxpayer.
Dividend Allowance
The Tax-Free Dividend Allowance for the 2023/24 tax year remains at £1,000 (£2,000 for the 2022/23 tax year). Dividend tax rates increased by 1.25% for the 2022/23 tax year, and maintained for the 2023/24 tax year, as shown below.
| Tax band | 2022/23 rates | 2023/24 rates |
|---|---|---|
| Basic Rate | 8.75% | 8.75% |
| Higher Rate | 33.75% | 39.35% |
| Additional Rate | 33.75% | 39.35% |
The rate of tax to be paid on overdrawn Directors Loan Accounts under s455 of the Corporation Tax Act 2010 is the dividend Higher Rate. From April 2022, the s455 rate increased to 33.75%.
National Minimum Wage and National Living Wage
Whilst not strictly a tax year change, National Minimum Wage and National Living Wage amounts increase to £10.42 per hour from 1st April 2023 for workers aged 23 years and over.
The National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age) increased from 1st April 2023 as follows.
| Age | 23 and over | 21 to 22 | 18 to 20 | Under 18 | Apprentice |
|---|---|---|---|---|---|
| April 2023 | £10.42 | £10.18 | £7.49 | £5.28 | £5.28 |
| April 2022 | £9.50 | £9.18 | £6.83 | £4.81 | £4.81 |
Company cars
Fully electric cars are charged at 1% of their list price in the 2021/22 tax year, and increased to 2% in 2022/23 and remain the same for 2023/24.
The percentage applied to the list price of the car is based on the CO2 emissions published by the Vehicle Certification Agency. HMRC has published a ready reckoner you can use to calculate your company car tax.
Company vans and fuel benefit for company cars
When your company pays for fuel you have used personally or allows personal use of a company van, it is a benefit kind (BiK). These fuel benefit charges only apply if fuel is provided for personal use.
The tax paid on such benefits is being increased from 6th April 2023. The BiK is a fixed amount for vans and the changes are as follows for directors and employees:
- The BiK on company vans increases to £3,960 (from £3,600).
- The BiK on fuel for a van provided for personal use increases to £757 (from £688).
This can be reduced if:
- you or your employee cannot use the van for 30 days in a row
- you or your employee pays you to privately use the van
- other employees use the van - divide £3,960 by the number of employees.
The fuel benefit calculation for cars is a little more complex.
A director/employee who is provided with a company car and also receives free fuel from his employer, is taxed on the cash equivalent value of the benefit each tax year. The cash equivalent amount is fixed each year and increases to £27,800 (from £25,300) on 6th April 2023.
The BiK charge is calculated by using an appropriate percentage, which is the same as the rate for company car benefit purposes (see above) and then multiplying by the fixed amount (£27,800 in 2023/24). So if the BiK percentage for your company car is 13%, your BiK amount on the fuel provided for personal use is £3,614 (13% of £27,800).
Student Loans
Student Loan Plan 1 and Plan 2 threshold increase and new Plan 4 repayments for Scottish Loans
The Department for Education has confirmed that from 6th April 2023 the earnings threshold before you start to repay a student loan for:
- Plan 1 loans increased to £22,015
- Plan 2 loans remains at £27,295
- Postgraduate loans remains at £21,000 (England & Wales) and £18,330 (Scotland & Northern Ireland)
- Plan 4 loans increased to £27,660.
If you’re a director being paid salary and dividends from your company, and you’re paying back a student loan, you must remember the threshold for repayment is based on your total income.
This will apply to all current and future student loans where employers make student loan deductions. So if you run a payroll for any employees who have student loan deductions, you need to ensure you have a record of what type of loan they have, so that the correct deductions are made.
Postgraduate Master’s Loan and Postgraduate Doctoral Loan
A Postgraduate Master’s Loan is a type of loan introduced by the government to help with course fees and living costs while you study a postgraduate master’s course. The repayment of your Postgraduate Loan is treated the same as any other Student Loan and interest is charged from the day you get the first payment. Repayment will be at 6% for students in England and Wales on income above £21,000. The rate is 9% for Scottish and Northern Irish students with income over £18,330 per year.
Other personal tax reliefs and allowances
Personal Savings
The band of savings income that is subject to the 0% starting tax rate remains at its current level of £5,000 for the 2023/23 tax year.
The adult ISA annual subscription limit for the 2023/24 tax year remains unchanged at £20,000.
The annual subscription limit for Junior ISAs and Child Trust Funds for the 2023/24 tax year is unchanged at £9,000.
Higher-income Child benefit charge threshold
Since January 2013, there has been a clawback charge on the higher earner of a couple where one claims Child Benefit and either has an income over £50,000. This has always been called the ‘High Income Child Benefit Charge’, but now for the first time, it appears that it can apply to a basic rate taxpayer, because there was no mention of a change to the £50,000 threshold, even though the Income Tax higher rate threshold did increase.
Personal pensions
The tax-free amount you can pay into a personal pension remains at £40,000 for the 2023/24 tax year. The lifetime allowance for pension savings remains at £1,073,100 and is frozen until 2026.
Capital Gains Tax
The Capital Gains Tax annual exempt amount for individuals has fallen to £6,000 from April 2023 (was £12,300 for 2022/23 tax year). It will fall again to £3,000 from April 2024.
Inheritance Tax
There is no change to the Inheritance Tax (IHT) nil rate band, the threshold remains at £325,000 and is frozen at that level until 2026.
Business Asset Disposal Relief
The Business Asset Disposal Relief lifetime allowance limit remains capped at £1 million.
Corporation Tax, workplace pensions and allowances
Corporation Tax
Corporation Tax payable on company profits remains at 19% for the 2023/24 tax year for those with profits below £50,000. The top rate will be 25% for those with profits in excess of £250,000. For those with profits between £50,000 and £250,000 a marginal percentage rate will be applied.
Workplace pensions (auto-enrolment)
There are no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension. This means the total amount of employer and employee contributions remains a minimum of 8% of your employee’s qualifying earnings.
| Date effective | Total minimum contribution | Employer minimum contribution | Staff contribute the remainder |
| Current | 8% | 3% | Up to 5% |
Annual Investment Allowance (AIA)
The Annual Investment Allowance of £1 million has been made permanent.
Corporation Tax Relief (‘super deduction’) business investment tax relief and loss relief for businesses
The super-deduction tax relief allows 130 per cent first-year relief on qualifying main rate plant and machinery investments from 1st April 2021 until 31st March 2023 for limited companies.
The government allows trading losses up to £2 million to be carried back one year without restriction. For accounting periods ending between 1st April 2020 and 31st March 2022, this is extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.
Personal and business tax changes for the new tax year starting on 6th April 2022
By Tom West - on 1 April 2022
Personal Tax, thresholds and allowances
The Personal Allowance (the amount you can earn before paying any Income Tax) remains at £12,570 for the 2022/23 tax year. The threshold for paying the Higher Rate of income tax (which is 40%) remains at £50,270. Both of these thresholds are frozen until 2026.
Tax rates and thresholds for the UK (excluding Scotland)
There have been changes to thresholds in the UK and also different changes for Scotland:
| Tax Year | 2021/22 | 2022/23 |
|---|---|---|
| Basic rate tax - The lowest level of Income Tax paid above the Personal Allowance. | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) | 20% on income between £12,571 and £50,270 (you pay tax on £37,700) |
| Higher rate tax - The middle tier of Income Tax. | 40% on income between £50,271 and £150,000 | 40% on income between £50,271 and £150,000 |
| Additional rate tax - The top rate of Income Tax for high earners. | 45% on income above £150,000 | 45% on income above £150,000 |
There are different Income Tax rates for Scottish residents
Scottish Income Tax Rates and Tax Thresholds
The Scottish Government operates a different income tax regime compared to the rest of the UK, with a lower starter rate and more tax bands and tax thresholds.
| Tax Year | 2021/22 | 2022/23 | |
|---|---|---|---|
| Tax Band name | Tax Rate | ---------Tax Bands and Thresholds--------- | |
| Starter rate | 19% | £12,571* - £14,667 | £12,571* - £14,667 |
| Basic rate | 20% | £14,668 - £25,296 | £14,668 - £25,296 |
| Intermediate | 21% | £25,297 - £43,662 | £25,297 - £43,662 |
| Higher rate | 41% | £43,663 - £150,000 | £43,663 - £150,000 |
| Additional rate | 46% | Over £150,000 | Over £150,000 |
The above tables assume the individual is receiving the Personal Allowance for tax-free income of £12,570 in the 2022/23 and 2021/22 tax years. The Personal Allowance is reduced by £1 for every £2 earned over £100,000. This is the same across the UK. There’s more background to the Scottish Income Tax rates and how to see if you’re classed as a Scottish taxpayer in our ‘Scottish Income Tax Rates and how to check if it applies to you’ knowledge article.
Impact on director tax-efficient salary recommendations
To maximise your tax efficiency as a single company Director and Shareholder in the 2022/23 tax year, we usually recommend your company should pay you a salary of £9,100 and dividends of up to £41,170.
This allows you to use all of the basic rate band of tax, where you pay tax at 20%, and assumes you have no other income. Your total personal tax bill would then be £3,123.75, on take-home pay of £47,146.25.
If you take more income in dividends you will pay tax on these at a rate of 33.75% as a higher rate taxpayer.
Dividend Allowance
The Tax-Free Dividend Allowance for the 2022/23 tax year remains at £2,000. Dividend tax rates increased by 1.25% for the 2022/23 tax year, as shown below.
The rate of tax to be paid on overdrawn Directors Loan Accounts under s455 of the Corporation Tax Act 2010 is the dividend Higher Rate. From April 2022, the s455 rate will increase from 32.5% to 33.75%.
National Minimum Wage and National Living Wage
Whilst not strictly a tax year change, National Minimum Wage and National Living Wage amounts increase to £9.50 per hour from 1st April 2022 for workers aged 23 years and over.
The National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age) increased from 1st April 2022 as follows.
| Age | 23 and over | 21 to 22 | 18 to 20 | Under 18 | Apprentice |
|---|---|---|---|---|---|
| April 2021 | £8.91 | £8.36 | £6.56 | £4.62 | £4.30 |
| April 2022 | £9.50 | £9.18 | £6.83 | £4.81 | £4.81 |
Company cars
The previously announced increases to benefit in kind (BiK) tax rates for company cars for the 2021/22 tax year have now come into force as planned. So, cars first registered after 5th April 2020 will see their benefit charge rise by one percentage point.
Fully electric cars have no tax charge in the 2020/21 tax year, but there will be a charge on 1% of their list price in the 2021/22 tax year, increasing to 2% in 2022/23 and expected to remain at this rate till 2024/25.
From 6th April 2021,the percentage applied to the list price of the car will increase based on the CO2 emissions published by the Vehicle Certification Agency. HMRC has published a ready reckoner you can use to calculate your company car tax.
Company vans and fuel benefit for company cars
When your company pays for fuel you have used personally or allows personal use of a company van, it is a BiK. These fuel benefit charges only apply if fuel is provided for personal use.
The tax paid on such benefits is being increased from 6th April 2022. The BiK is a fixed amount for vans and the changes are as follows for directors and employees:
- The BiK on company vans increases to £3,600 (from £3,500)
- The BiK on fuel for a van provided for personal use increases to £688 (from £669).
This can be reduced if:
- you or your employee cannot use the van for 30 days in a row
- you or your employee pays you to privately use the van
- other employees use the van - divide £3,600 by the number of employees
The fuel benefit calculation for cars is a little more complex.
A director/employee who is provided with a company car and also receives free fuel from his employer, is taxed on the cash equivalent value of the benefit each tax year. The cash equivalent amount is fixed each year and increases to £25,300 (from £24,600) on 6th April 2022.
The BiK charge is calculated by using an appropriate percentage, which is the same as the rate for company car benefit purposes (see above) and then multiplying by the fixed amount (£25,300 in 2022/23). So if the BiK percentage for your company car is 13%, your BiK amount on the fuel provided for personal use is £3,289 (13% of £25,300).
Student Loans
Student Loan Plan 1 and Plan 2 threshold increase and new Plan 4 repayments for Scottish Loans
The Department for Education has confirmed that from 6th April 2022 the earnings threshold before you start to repay a student loan for:
- Plan 1 loans increased to £20,195
- Plan 2 loans remains at £27,295
- Postgraduate loans remains at £21,000 (England & Wales) and £18,330 (Scotland & Northern Ireland)
- Plan 4 loans increased to £25,375.
If you’re a director being paid salary and dividends from your company, and you’re paying back a student loan, you must remember the threshold for repayment is based on your total income.
This will apply to all current and future student loans where employers make student loan deductions. So if you run a payroll for any employees who have student loan deductions, you need to ensure you have a record of what type of loan they have, so that the correct deductions are made.
Postgraduate Master’s Loan and Postgraduate Doctoral Loan
A Postgraduate Master’s Loan is a type of loan introduced by the government to help with course fees and living costs while you study a postgraduate master’s course. The repayment of your Postgraduate Loan is treated the same as any other Student Loan and interest is charged from the day you get the first payment. Repayment will be at 6% for students in England and Wales on income above £21,000. The rate is 9% for Scottish and Northern Irish students with income over £18,330 per year.
Other personal tax reliefs and allowances
Personal Savings
The band of savings income that is subject to the 0% starting tax rate remains at its current level of £5,000 for the 2021/22 tax year.
The adult ISA annual subscription limit for the 2021/22 tax year remains unchanged at £20,000.
The annual subscription limit for Junior ISAs and Child Trust Funds for the 2021/22 tax year is unchanged at £9,000.
Higher-income Child benefit charge threshold
Since January 2013, there has been a clawback charge on the higher earner of a couple where one claims Child Benefit and either has an income over £50,000. This has always been called the ‘High Income Child Benefit Charge’, but now for the first time, it appears that it can apply to a basic rate taxpayer, because there was no mention of a change to the £50,000 threshold, even though the Income Tax higher rate threshold did increase.
Personal pensions
The tax-free amount you can pay into a personal pension remains at £40,000 for the 2022/23 tax year. The lifetime allowance for pension savings remains at £1,073,100 and is frozen until 2026.
Capital Gains Tax
The Capital Gains Tax annual exempt amount for individuals remains at £12,300 for the 2022/23 tax year and will be frozen at that level until 2025/26
Inheritance Tax
There is no change to the Inheritance Tax (IHT) nil rate band, the threshold remains at £325,000 and is frozen at that level until 2026.
Entrepreneurs’ Relief
From 6th April 2020 the Entrepreneurs Relief lifetime allowance limit remains capped at £1 million.
Corporation Tax, workplace pensions and allowances
Corporation Tax
Corporation Tax payable on company profits remains at 19%-25% for the 2025/26 and 2024/25 tax year.
Workplace pensions (auto-enrolment)
There are no changes to the minimum amount you need to pay into your employee’s auto-enrolment workplace pension. This means the total amount of employer and employee contributions remains a minimum of 8% of your employee’s qualifying earnings.
| Date effective | Total minimum contribution | Employer minimum contribution | Staff contribute the remainder |
| Current | 8% | 3% | Up to 5% |
Annual Investment Allowance (AIA)
The permanent limit for the AIA was set at £200,000 on 1st January 2016. However, from 1st January 2019, the AIA limit was temporarily raised to £1 million, with this increased limit scheduled to remain in place until 31st December 2021. More information can be found in our Annual Investment Allowance guide.
Corporation Tax Relief (‘super deduction’) business investment tax relief and loss relief for businesses
The super-deduction tax relief allows 130 per cent first-year relief on qualifying main rate plant and machinery investments from 1st April 2021 until 31st March 2023 for limited companies.
The government allows trading losses up to £2 million to be carried back one year without restriction. For accounting periods ending between 1st April 2020 and 31st March 2022, this is extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.
Important changes to consider for the 2020/2021 tax year
By ChurchillKnight Associates
The end of the tax year is fast approaching, and it is important to use the next few months to organise your finances. You should ensure you have maximised all of your tax-free allowances and have claimed the appropriate tax relief. Our short guide will provide you with a simple checklist of the critical changes you can expect to see in the new tax year.
What is changing in the new tax year?
This information is based on the Government’s manifesto pledges and is subject to change in the Budget, which will be announced in March.
Personal Allowance and Income Tax thresholds
The Personal Allowance for the 2020/21 tax year is not expected to change and will remain at £12,500 – this is tax-free and is applied throughout the UK.
How much tax you will need to pay each year will depend on the tax band which you fall into and how much of your income is above the Personal Allowance. The basic rate threshold for England, Northern Ireland, and Wales will remain the same at £37,500. Taxpayers will fall into the higher-rate tax bracket once their income exceeds £50,000 (inclusive of the personal allowance).
Income Tax bands and rates are slightly different in Scotland and could be subject to change when the Scottish Budget is announced.
VAT Reverse Charge
The VAT reverse charge for construction services will apply from the 1st October 2020, in a bid to tackle fraud in the construction industry. The reverse charge will apply to transactions between VAT-registered businesses, and it will mean the customer is now liable to account for VAT in purchases rather than the supplier. The VAT cash will no longer flow between businesses and will have to be registered and stated on the invoice as a reverse charge.
Capital Gains Tax
From the 6th April 2020, there are three significant changes to capital gains tax: reduction in the final period of exemption, lettings relief, and a 30-day window.
The proposed changes to lettings relief will potentially only be available to landlords who shared occupation of their house with a tenant. Lettings relief can reduce capital gains tax due on the sale of a property as you can claim up to £40,000 individually or up to £80,000 if a partner or spouse jointly owns the property.
The final period of exemption relief can be applied to a property up for sale, provided the property is sold within 18 months of the owners moving out. The owners will not be subject to capital gains tax on the sale of the property. The final period of exemption will be reduced to 9 months, and it will increase the capital gains tax liability for anyone selling their main residence and who has accrued a period of private residence relief.
From April 2020, anyone making a taxable gain from selling a UK residential property must submit a residential property capital gains return within the 30-day window and pay any capital gains tax owed.
Off-Payroll in the Private Sector
IR35 in the private sector – now referred to as off-payroll working in the private sector – is changing from April 2021. Similarly to off-payroll in the public sector, any medium or large private sector businesses hiring contractors or freelancers will be responsible for determining the IR35 status of their workers.
For contracts that are deemed inside IR35, workers are required to have National Insurance and PAYE deducted at source from their income. The ‘fee-payer’ (usually the end client or agency) will be responsible for making the relevant deductions before paying the contractor their net salary.
Umbrella companies are considered the easiest way for contractors and freelancers to get paid. However, there are a few key differences that you need to be aware of when moving from a limited company to an umbrella company.
Inheritance Tax
Inheritance Tax is a tax on the estate of someone who has passed away – how much tax you pay depends on the value of the estate. There is no tax due if the value of the estate is below the £325,000 threshold or everything is left to a civil partner, spouse, amateur sports club or charity.
The residence nil-rate band (RNRB) was introduced in the 2017/18 tax year as an additional tax-free threshold on top of the existing £325,000 allowance if the main residence is passed on. The residence nil-rate band is due to rise to £175,000 in 2020/21 (meaning a total allowance of £500,00).
Pension Allowances
The lifetime allowance is due to rise to £1.075m for the 2020/21 tax year – in-line with the rate of inflation from September 2019 and subject to rounding up.
The Lifetime Allowance is the tax-free allowance on all of your pensions, including workplace pensions which you can accrue during your lifetime. State pensions and overseas pensions are excluded from this allowance. You will not pay the tax charge on your pension savings until it exceeds the Lifetime Allowance or you reach 75 years of age.
National Living Wage
The national living wage hourly rate for over-25s will increase by 50p to £8.72.
5 tax-planning tips for 2019
By Easy Accountancy - on 02/01/2019
With Christmas out of the way and 2019 under way, your attention may be turning towards maximising the reliefs and allowances available before 2019/20 comes around.
Here are five of the best tax-planning opportunities to help minimise your tax liabilities until the end of the financial year on 5 April 2019.
The marriage allowance
Everyone in the UK has a personal allowance, on which no tax has to be paid. This is £11,850 for 2018/19, with non-savings income above it taxed at marginal rates ranging from 20% to 45%.
You may be able to transfer £1,190 of your personal allowance to your spouse or civil partner if neither of you is a higher-rate taxpayer earning more than £46,350 a year, or £43,430 in Scotland.
This is known as the marriage allowance, and can save you up to £238 a year if your spouse or civil partner is not able to use all of their personal allowance.
ISAs
ISAs have remained largely untouched since 2015, and you can still open and save up to £20,000 into one until 5 April 2019 without paying tax.
What's more, you could also put another £20,000 into your ISA the very next day if you wished, although this would use up your entire allowance for 2019/20.
No income tax or capital gains tax is owed on any growth, income or withdrawals from an ISA, although the value of your ISA would be liable for inheritance tax as it forms part of your estate.
Until April, you can save up to £4,260 into a Junior ISA on behalf of a child under the age of 18.
You also have four months to invest £4,000 into a Lifetime ISA, which will help with buying a first home or retirement saving. The Government adds a bonus of up to 25% of your savings.
Capital gains tax
If you're planning on selling an asset before 5 April 2019, you're entitled to make a tax-free gain of up to £11,700 (or up to £5,850 for trusts).
Married couples and civil partners each have an allowance of £11,700 in 2018/19, with gains above this threshold usually taxed at your marginal rate of income.
If your taxable income, such as earnings from work, is within the threshold for the basic-rate tax band, the excess before you reach the higher-rate tax thresholds can be used to offer relief on capital gains.
For example, the basic-rate band threshold in England goes up to £34,500, so if you earn £20,000 a year, the unused allowance is £14,500.
That means tax on the first £14,500 of any capital gains will be 10%, going up to 20% on any amount beyond that threshold. In Scotland, the personal allowance threshold is £31,581 - but the same principle applies.
For business owners, you can claim entrepreneurs' relief to lower your tax rate to 10% on qualifying gains. The maximum reduction in tax is £1 million.
Inheritance tax
Tax is usually due at a rate of 40% when someone dies, but only if the inheritance threshold of £325,000 is exceeded.
There is an extra £125,000 residence nil-rate band, which is available subject to certain conditions such as leaving the family home, or a share of one, to direct descendants.
This residence nil-rate band is set to rise annually until April 2020, when it reaches £175,000.
This means the available nil-rate band will reach a maximum of £500,000 for individuals or £1 million for married couples or civil partners.
It's possible to transfer a percentage of any unused nil-rate band to a surviving spouse following the first death, allowing up to double the nil-rate band available at the date of the second death.
Gifts made within seven years of death are also added back into the estate and are liable to inheritance tax, although some exemptions and a tapered relief may apply.
Corporation tax
The main rate of corporation tax remains fixed at 19% until 31 March 2020.
If you own a company, you will need to complete corporation tax self-assessment to work out your own tax liability as part of your return and account for the self-assessed liability to corporation tax.
Taxable profits are typically reduced by employers making pension contributions, while self-invested personal pensions are popular with many company owner-directors.
Another tax-reduction strategy is to bring qualifying capital expenditure of up to £1 million forward to take advantage of the 100% annual investment allowance.
Get in touch for more advice on tax-efficient planning.
Tax and finance changes for 2018
By Easy Accountancy - on 03/01/2018
With Christmas done and dusted for another year and many of us returning to work this week, there's no better time to get clued up on the major tax and finance changes for 2018.
Most of these changes won't come into force until the start of the next financial year - on 6 April 2018 - but being aware of what's around the corner may save you tax in the coming months.
Some measures are waiting to receive Royal Assent, so here's what we know so far.
Income tax
The personal allowance will increase to £11,850 around the UK, while the higher rate threshold will rise to £46,350 in England, Wales and Northern Ireland.
For taxpayers in Scotland, there will be 5 income tax bands and rates for the first time.
The higher rate threshold in Scotland will rise to £44,274 - and 2 new income tax bands will also be in play. Assuming individuals are in receipt of the personal allowance, these are:
- the starter rate: £11,851 to £13,850
- the intermediary rate: £24,001 to £44,273.
Property taxes
Since 22 November 2017, first-time buyers in England and Northern Ireland have been able to get on the property ladder without paying stamp duty on properties worth up to £300,000.
In response to that measure announced in Autumn Budget 2017, Wales announced it will raise its land transaction tax rate from £150,000 to £180,000 for all homebuyers - but not until 1 April 2018.
And from 6 April 2018, first-time buyers in Scotland will be able to buy a property worth up to £175,000 without being liable for land and buildings transaction tax.
Corporation tax
The corporation tax rate around the UK will remain at 19% from 1 April 2018.
R&D
The research and development expenditure credit (RDEC) increased to 12% on 1 January 2018.
Enterprise investment scheme
From 6 April 2018, it will be possible to invest up to £2 million in knowledge-intensive companies under the enterprise investment scheme.
A knowledge-intensive company is classed as a smaller, innovative business carrying out R&D and other activities to develop intellectual property for its own purposes.
VAT
The current VAT thresholds remain unchanged until 31 March 2020.
Therefore, a business must be VAT-registered when their taxable turnover in the last 12 months exceeds £85,000 or is expected to exceed £85,000 in the next 30 days.
An individual can apply to deregister for VAT if taxable turnover drops below £83,000 in the last 12 months.
Capital gains
If your company makes a capital gain on or after 1 January 2018, the indexation allowance that determines the chargeable gain will be calculated up to December 2017.
For 2018/19, the capital gains tax allowance will rise to £11,700.
Inheritance tax
The inheritance tax (IHT) threshold (£325,000) and various rates remain unchanged for 2018/19. However, the residence nil-rate band increases to £125,000 from 6 April 2018.
This can be added to the basic IHT threshold (giving a combined total of £450,000) if the person and their estate meet the qualifying conditions - and can be doubled for married couples.
ISAs
The annual ISA limit stays at £20,000 for the next financial year, although the junior ISA threshold will increase to £4,260 from 6 April 2018.
Talk to us about financial planning.
Reporting expenses and benefits
By Easy Accountancy - on 10/05/2017
Most employers operate PAYE as part of their payroll to collect income tax and national insurance from employment. They can also register to collect tax on employee expenses and benefits through payroll during the tax year. This is known as payrolling.
Those who’ve registered for payrolling before the 2016/17 tax year do not need to report any benefits that have already been taxed through the payroll system.
Expenses and benefits not payrolled will need to be reported to HMRC by 6 July 2017.
This article will explain the key steps to completing and submitting your records on time.
How it works
Employee expenses and benefits must be reported on specific forms which are on the HMRC website.
There are 2 forms to complete: P11D and P11D(b).
Forms
You need to fill out a P11D form to report any end-of-year expenses or benefits you have given to your employees or directors within your business that have not been taxed through payroll.
Form P11D(b) is used to report the amount of class 1A national insurance contributions due on expenses.
Completing details
HMRC asks employers to use the following format when completing form P11D:
- use Arial font size 11 (when printed)
- sort by employee, not benefit type
- include your employer reference
- include employee’s name and national insurance number
- put an employee’s expenses and benefits on the same line
- include P11D letter codes next to each benefit.
Payrolled benefits
You need to inform your employees of what expenses or benefits you have deducted through payroll.
Employers must tell staff about the following before 1 June after the end of each tax year:
- their tax code might be changed to take any benefits from previous employers
- the new benefit won’t be included in their tax code
- any underpaid tax paid through their existing tax code will still be collected.
Talk to us today about your reporting obligations.
Tax and finance changes for 2017
By Easy Accountancy - on 20/12/2016
As 2016 draws to a close we preview the major tax and finance changes due for 2017.
Although most of the changes don't take place until April, now is the time to start planning as there may be opportunities to save tax.
It's also worth remembering that some of the measures are currently passing through parliament and may therefore be subject to change.
Income tax
The personal allowance will be £11,500 for 2017/18. The higher rate threshold will increase from £43,000 to £45,000. The higher rate threshold in Scotland is due to be £43,430.
Corporation tax
The corporation tax rate will be 19% from 1 April 2017.
Domiciles
Anybody resident in the UK for more than 15 of the past 20 years will be deemed a UK domicile for tax purposes from 6 April 2017.
Auto-enrolment staging dates
Smaller businesses will continue to take start auto-enrolment in 2017. The process takes time so if your business is yet to begin the process, now is the time to start planning.
Property and trading income allowance
Frome 6 April 2017, there will be 2 new income tax allowances of £1,000 each for trading and property income.
Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income.
Tax relief for residential landlords
Relief on finance costs, including mortgage interest payments, available to individual landlords of residential property will be restricted to the basic rate of tax.
This restriction will be phased in over a 4-year period, starting from April 2017.
ISAs
The annual ISA saving limit will be £20,000 (or £4,128 for Junior ISAs) for 2017/18.
The Lifetime ISA, which is designed to help people save for retirement or a first home, will be launched in April 2017.
Making Tax Digital
The government will announce more detail about its plans to move to digital tax accounts in early 2017.
Inheritance tax
The residence nil-rate band of up to £100,000 per person will be introduced for 2017/18. This is set to increase in future tax years.
The new year is an important time to self-reflect and review your financial situation before the start of the 2017/18 tax year in April. Contact us to discuss how these changes may affect you.
Initial thoughts on Taxation after Brexit
By Graeme Blair - on 24/06/2016
Although the Brexit process is anticipated to take at least two years it is worth considering the possible tax consequences of leaving the EU.
Indirect Tax
The UK is part of the EU Customs Union and therefore goods can be moved to and from other member states without duties (either customs duties or import VAT). There are reduced compliance obligations on intra-EU transfers.
Unless the UK negotiates otherwise then goods brought into the UK from the EU will be subject to import VAT and import duty. Conversely goods exported out of the UK and into the EU will be subject to EU import VAT/duty.
The EU has negotiated favourable terms of export to third countries and the UK may lose the benefit of these rights. However the UK will no longer be bound to EU rates and tariffs and therefore may be able to reduce costs of importation or negotiate separate (even more favourable) terms of exports to third country.
The rate of VAT in the UK is controlled by Brussels. On leaving the EU these restrictions will be lost and therefore the standard rate of VAT may change and/or the items to which the zero rate applies extended.
At present there is a process allowing the UK to recover VAT incurred in other EU countries. This involves access to a single portal on the HMRC website. Although recovery will still be possible after Brexit the administrative process is likely to change and therefore there may be delays in future recovery of EU VAT.
Direct Tax
Direct taxes are broadly determined by member states without direction from Brussels and therefore there should be little impact on direct tax rates. Irrespective of this independence there are UK rules which have been specifically designed to be compatible with EU law and EU freedoms. Those rules can be repealed or varied.
Some tax reliefs are subject to EU state aid considerations and cannot be implemented without EU approval. Theoretically those reliefs could be expanded considerably. However the UK will remain a member of the OECD and therefore subject to OECD harmful tax practice considerations. These considerations are likely to restrict the introduction of very generous tax reliefs.
Withholding Taxes
There are exemptions from domestic withholding taxes for payments to EU members. After Brexit those exemptions would not necessarily continue and the rate of withholding tax would be determined by the tax treaty between the UK and its European neighbours. In the absence of any other agreements this would suggest an increase in withholding taxes on both inbound and outbound payments. Arrangements with gross up clauses (i.e. the recipient receives a certain sum and any withholding tax is a cost to the payer) would need to be managed carefully.
The UK does not have any outbound dividend withholding tax and therefore dividend payments out of the UK would remain unaffected.
Social Security
There are specific rules which apply to EU residents who work in another member state. They are designed to restrict the social security contribution to one state and determine which state that is. These rules may not apply after Brexit and this could lead to double taxation for some internationally mobile workers.
Timings for change
Any changes are not likely to be immediate. I would anticipate that Budget 2018 would prepare the country for any changes in our domestic taxation.
The reality is that no-one really knows the taxation impact of Brexit and the extent that some, or all, of the above occur can only be determined with the fullness of time.
UK Budget changes happening now
By Ken Shelton - on 04/05/2016
We look at what is being introduced now as a result of the Budget, and how this will affect you.
- The personal allowance increases from £11,000 in 2016/17 to £11,500 in 2017/18. This is the basic tax free level of earnings that most of us can benefit from.
- The higher rate threshold increases from £32,000 in 2016/17 to £33,500 in 2017/18. Individuals entitled to a full personal allowance will not be liable to higher rate tax until their total income exceeds £43,000 in 2016/17 and £45,000 in 2017/18. The higher rate of tax on salaries and pensions is remaining at 40%.
- Last year an announcement was made about restriction of finance costs for landlords of residential property. This comes into effect from 6 April 2017. Also announced last year was that the wear and tear allowance is being abolished from April 2016. Landlords will be able to deduct the actual costs of replacing furnishings.
- The existing dividend tax credit is being abolished from April 2016 and a new dividend allowance of £5,000 a year is being introduced.
- Tax on dividend income above the allowance will be charged at:
- 5% for basic rate taxpayers
- 5% for higher rate taxpayers
- 1% for additional rate taxpayers.
- A personal savings allowance is being introduced from 6 April 2016 to remove tax from up to £1,000 of savings income from a basic rate taxpayer and up to £500 for higher rate taxpayers. Additional rate taxpayers will receive no allowance.
Looking further ahead, a number of changes will be implemented from April 2017:
- A new lifetime ISA will be available for adults under the age of 40 from April 2017. Individuals will be able to contribute up to £4,000 per annum and will receive a 25% state bonus.
- Funds, including the bonus, can be used to purchase a first home at any time after the first annual anniversary of opening the account. Funds may be withdrawn from the age of 60.
- The overall annual ISA subscription limit will increase from £15,240 to £20,000 from 6 April 2017.
- The government is introducing a new £1,000 allowance for property income and a new £1,000 allowance for trading income from April 2017. Individuals with less than £1,000 of either source of income will no longer need to declare or pay tax on that income. Examples of this would be small trade online and renting out driveways. If you have income below this level there is no need to report. However, if your income is above this level you can choose to deduct their expenses in the usual manner or simply deduct the £1,000 allowance.
