A new tax year - what is changing? - The BESA
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Friday, April 6, 2018

A new tax year - what is changing?

Alexi Ozioro, Public Affairs and Policy Manager

With the new tax year starting today many rumours of a large a shake-up in the tax system have been thrown around. As with everything when money and politics are involved, some of these are true and some are not. From the controversial new sugar tax to the ongoing fuel duty freeze, here is a quick summary for BESA members of what is actually changing:

 

National Living Wage – UP

The National Living Wage today rises to £7.83 an hour, up from £7.50 an hour. This applies to all employees aged 25 and over, as long as they are not in their first year of an apprenticeship. For more information and National Living Wage levels, check the Government website here.

 

Income Tax - DOWN

Although the actual rate of income tax has not gone down, the point at which workers have to start paying tax today rises from £11,500 to £11,850. A minor increase, but good news for a lot of people.  The level at which workers start paying the higher rate of tax is also rising from £45,000 to £46,350.

 

Inheritance Tax – DOWN

New measures mean that those who own a home will now pay less inheritance tax when passing it on. Although, there is not going to be an increase in the main exemption (the first £325,000 of any estate), the extra exemption for property is going up from £100,000 to £125,000.

 

Apprenticeship Levy – STAGNANT

One year since the introduction of the apprenticeship levy, business groups have been calling very strongly for reform of the policy, with firms leaving over £1bn of funding untouched. Data published by the Open University today shows that businesses have paid £1.39bn into new National Apprenticeship Service accounts, yet have withdrawn just £108m. Businesses have only one year left to spend that money before it begins to expire. The levy aims to boost the UK's skills base by requiring firms with an annual wage bill of £3m or more to pay 0.5 percent of their staff costs into a fund that is also topped up with public money.

 

Council Tax – UP

Council tax is shooting up by an average of 5.1 percent from the beginning of April 2018, with Londoners in particular seeing an average rise of £55. The increases in council tax will have been set and decided individually by each local authority, with a government mandated amount of any increase in revenue set aside for adult social care.

 

Personal allowance - UP

This applies to you if you pay Income Tax, are an employer and if you contribute to a pension. The personal allowance is going up to £11,850, so people do not pay tax on the income they earn below this amount, though there are some exceptions for high earners. Your personal allowance goes down by £1 for every £2 that your adjusted net income is above £100,000, so your allowance would be zero if you are lucky enough for your income to exceed £123,700. The government have committed to raise the personal allowance to £12,500 by the end of this parliament and that these changes will mean a typical basic-rate taxpayer will take home £1,075 more than in 2010-2011. More information from HMRC can be found here.

Pensions – UP

The state pension is going to increase by three per cent, with a cash increase of £3.65 per week for anyone already retired, according to the Treasury. From today, all workers who have auto-enrolment pensions will have to pay more in, with monthly contributions rising from a minimum of one percent to a minimum of three percent. If you need any more information, check out further information on the Welplan Pensions website, your association’s pension provider.

 

Fuel Duty - FROZEN

If you use a van, car or anything that requires petrol, you will be pleased to hear that fuel duty is staying frozen. For the eighth year in a row, fuel duty will remain at 57.95p per litre, which the government estimates will save the average driver £160 a year.

 

Student Loans – STEADY

The pay threshold after which graduates begin to pay back their student loans goes up from £21,000 per year to £25,000. The government have said that this continuing rise is "in line with changes to average earnings". If you or your employees are affected you can find out more at the Student Loans Company re-Payment Portal.

 

Sugar Tax – BITTER SWEET

Some tax changes have been more controversial than others, but the sugar tax has not disappointed when it comes to debate and headline puns. The new sugar tax is introduced today and means consumers will have to pay up to 24p extra per litre of sugary fizzy drinks. As part of a public health drive, the idea is that consumers will buy less unhealthy drinks or companies will change their recipes to include less sugar and avoid the tax. Critics claim the tax will only harm poorer consumers, and the Institute for Economic Affairs says it is "a cynical revenue raising device that will clobber people on low incomes". The government though say they hope this will encourage people to make decisions that will make them healthier.

 

 

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