What to expect from your 2018 Tax Return 

 

A number of changes have been made to the tax rules recently which may affect you, leading to your liability potentially being higher (or lower!) than expected as a result!  Some of the main changes are mentioned below:

Dividends

  • No longer any notional tax deduction at source
  • The first £5,000 of dividends each year will be tax free, reducing to the first £2,000 from 6th April 2019
  • Minimum 7.5% tax charge on dividends above this, so an increase in tax of 7.5% for even basic rate tax payers who paid nothing via self-assessment in previous years

 

Landlords

  • No longer able to claim wear and tear each year on furnished properties, replacement furnishing costs only allowed which could result in higher taxable profits
  • Restrictions on the deduction of mortgage interest payments from April 2017 affecting higher rate tax payers and potentially affecting tax liabilities on other income
  • 3% Stamp Duty Land Tax surcharge on additional properties purchased
  • If you haven’t already attended one of our Investing in Property workshops, sign up via our website at https://www.a4g-llp.co.uk/events-seminars/investing-property/ to find out more

 

Rent a Room

  •  Relief of up to £7,500 per year is available where you rent a room to a lodger in a house you continue to live in

 

Tax on Disposals

  • The first £11,300 of gain on sales of assets, such as shares or property, will be exempt from tax. Any excess gain will be taxed at 10% or 20% depending on what has been sold, and also whether you are a higher rate tax payer or not. These rates increase to 18% and 28% if the sale is of UK residential property. Various reliefs are available to set against these gains, which may reduce the charges further. We will account for these where possible. 

 

Restricted pension annual allowance

  • Up to £40,000 can be paid into a personal pension annually, more if you have unused allowances from the previous 3 years
  • Where income is in excess of £150,000, the annual amount that can be invested in a pension will be restricted
  • The maximum restriction will be £30,000 ie you will still be allowed to pay up to £10,000
  • Contributions may need to be reduced or an annual allowance charge may have to be paid on 31st January
  • For more information on pensions, visit our website at https://www.a4g-llp.co.uk/our-services/protecting-and-growing-your-wealth/overview-pensions/

 

National Insurance for sole traders

  • This used to be paid monthly or quarterly to the National Insurance office
  • It now forms part of the tax liability payable on 31st January each year, increasing the lump sum payable by £148.20 in 2018 (£153.40 in 2019)

 

Personal savings allowance

  • Interest is no longer taxed at source and is instead paid gross
  • As long as earning below £150,000, no tax is due on the first £1,000 of interest received, £500 for higher rate tax payers
  • If your income, exclusive of savings, is below £16,000 you may also be entitled to the Starting Rate for Savings giving you up to £5000 extra tax free allowance. 

 

Marriage allowance

  • Availability to transfer up to £1,100 of the personal allowance to a spouse if

                    - One party is a basic rate tax payer
                    - The other earns less than the personal allowance

 

If you want to discuss in more detail how any of the issues above are relevant to your specific circumstances, get in touch with your client manager who will be happy to help.

Whatever issues affect you personally, the important thing is to get your tax return prepared as soon as possible after 5th April so that, whatever the outcome, you will be forewarned and will have plenty of time to plan if the end tax bill is not what you had hoped!

If not already signed up to the A4G Portal, we recommend that you log onto our website and get this set up now so that information for your return can be exchanged quickly and securely in both directions and we can get your tax return moving.