New UK Income Tax Rates and Brackets for 2018 – 19: Here’s What They Mean for You


Another year, and another raft of changes to the tax rates and brackets of the UK, but what does it mean for you?

Well, in this short guide, we’ll explain which allowance applies to your earnings, discuss changes to wages, student loans, and dividends, and pinpoint the positives, as well as the negatives.

But first thing’s first.

What’s a tax allowance?

Every individual in the UK has an allowance for an amount of income that can be earned without having to pay income tax. Once you have earned more than the allowance, you will have to pay certain amounts of tax depending on how much you earn.

Changes to the personal allowance

In the tax year of 2017/18, the personal allowance for earnings under £100,000 was £11,500. This tax year, this has risen in line with inflation to £11,850.

What’s more,  the  maximum  allowance  for  married  couples  has  risen  again since  the  last  tax  year,  which  means  you  can  now  transfer  £1,190  of  your  personal  allowance  to  your  husband,  wife,  or  civil  partner,  if  they  earn  more  than  you. This could reduce their tax by up to £238 in the tax year

Other important changes

Changes to National Living Wage/Minimum Wage

Both the National Living Wage and the Minimum Wage have risen above the rates of inflation, unlike the changes to income tax.

The National Living Wage (NLW) applies to anyone aged 25 or over. It has increased to £7.83 from £7.50.

Those aged under 25 are not entitled to the NLW, but they can enjoy the rises in the Minimum Wage:

  • Those aged 21-24 will receive £7.38, up from £7.05.
  • Those aged 18-20 will receive £5.90, up from £5.60.
  • Those aged under 18 will receive £4.20, up from £4.05.

Changes to Student Loan Threshold Increase 

This year, the earnings threshold for repaying your student loan will be £18,330 for Plan 1 loans, and £25,000 for Plan 2 loans.

This affects millions of people across the UK, and it might be a huge relief for many of them.

The student loan interest rates have also risen to 6.1%. This may seem worrying, however, the increase does not mean that you need to pay any more than what you currently repay each year.

As it stands, you must repay the loan at a rate of 9% of what you earn over and above £25,000. No matter how much you earn, you will still be in the ‘above £25,000’ bracket, meaning you’ll remain at the 9% rate.

Changes to Dividends

While most of the changes made this year have been mainly positive, there have been some negatives too. One of the most notable is the change to dividends.

Dividends are given to shareholders of limited companies, if the company has made a profit. There’s also a dividend allowance, which is an allowance for a certain amount of dividends that can be paid without incurring tax.

Previously, this allowance was £5,000. However, this year, it has been dramatically reduced to £2,000. For those in a basic tax band, this will mean a lost of £225 (7.5% basic rate dividend tax x £3,000). For higher-rate taxpayers, there will be a loss of £975, while additional-rate payers are looking at a £1,143 loss.

Company Cars

Another possible negative is the increased rates of diesel cars. Previously, all diesel models had a surcharge of 3% added to tax, whereas this tax year, this has been raised to 4%. It’s a small change, but it has the potential to affect businesses all the same.

While it’s certainly a negative from a financial point of view, it will force businesses to consider how the emissions of their diesel vehicles are impacting the environment – something that could be a huge positive in the long-term.

State Pension

Let’s end on a somewhat happy note. The State Pension has risen by 3%, meaning an extra £3.65 a week for retirees on the Basic State Pension. This increase, from £122.30 to £125.90, equates to an extra £189.80 a year.

For those on the New State Pension (men born on or after 6th April 1951, and women born on or after the 6th April 1953) will see a weekly increase from £159.55 to £164.35 per week.

Furthermore, the Lifetime Pension Allowance has risen, after being frozen for two years at £1m. It is now at £1.03m.

Still not sure where you stand? We can help!

If you’re not completely sure what the new tax year has in store for you, both personally and professionally, we can steer you right.

Contact us here to speak with one of our friendly advisors today.

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