The new tax year started a few weeks ago and there are some significant changes for small business owners. You can download the Focus Accountancy tax app to get up to date tax rates as well as lots of other useful features but we’ve summarised most of the important changes that may affect you below:
Tax rates
• Your personal allowance goes up from £11,850 to £12,500
• You start paying national insurance after £8,632 rather than £8,424
• You’ll still get £2,000 worth of tax-free dividends
• Higher rate tax will be paid after £50,000 rather than £46,350
This might not appear to be much of a difference but for small business owners looking to stay under the higher rate tax threshold, it means they could take an extra £3,650 in dividends and only pay £225 of extra tax (that’s effectively 6.2%).
Minimum wage rates
• Age under 18 has risen from £4.20 to £4.35
• Age 18 to 20 has risen from £5.90 to £6.15
• Age 21 to 24 has risen from £7.38 to £7.70
• Age 25 and over has risen from £7.83 to £8.21
For anyone who employs full-time minimum wage workers, it’s going to cost over £700 extra per employee this year (over £2,100 more than 5 years ago). These increases have been significantly rising over the last few years with over a 22% increase in just 5 years compared with around 10% in the previous 5 years.
Auto enrolment pension contributions
• The total minimum contribution goes up from 5% to 8%
• The minimum contribution for employers goes up from 2% to 3%
This is the final stage of the initial plan for auto enrolment so most people expect these rates to remain constant for the next few years.