Daily Insight: a quick guide to April 6 and the 2018 tax year
Contrary to appearances, there's nothing random about the numbers five and six. Owing to anomalies between the Julian and Gregorian calendars, today (April 5) marks the end of the UK tax year. The new one starts on April 6 and, with it, the measures contained in the UK chancellor's budget, come into play.
Just back to those calendars for a minute. Why April 6? Well, there is a very good explanation about it all here. Basically, by 1752 Britain was 11 days out of synch with the rest of Europe (in those days new year was March 25) and needed to realign itself. The result, give or take: April 6.
So here's a quick reminder of what the accountants need be looking out for.
Dividend allowance reduction
The first is dividend allowance reduction. This cuts the tax-free allowance for dividend income from £5,000 to £2,000.
And any dividend income above £2,000 is taxed at 7.5 per cent for basic rate payers. Higher-rate dividends are taxed at 32.5 per cent, and additional rate taxpayers pay 38.1 per cent.
Director shareholders of private companies paying themselves in dividends, rather than salary, will be affected. The change will also affect investors with portfolios with more than £2,000 of income a year, held outside ISAs or pensions.
Typically around £50,000 in shares typically producing around £2,000 in income.
Individual landlords
So, as from Friday, mortgage interest tax relief for individual landlords will be affected.
They will be able to offset half their mortgage interest payments against their profits, down from 75 per cent this tax year.
By 2020 that figure will be down to 20 per cent.
On a more general note
On a more general note, tax-free personal income allowance increases to £11,850 from £11,500 and the 40 per cent tax earning threshold increases from £45,001 to £46,350.
The state pension rises by 3 per cent, and the total minimum pension contributions (by employers and employees) for auto-enrolment rise from 2 to 5 per cent.
Capital gains tax allowance rises from £11,300 to £11,700, and the inheritance tax nil-rate band rises from £100,000 to £125,000. The main house inheritance tax allowance remains at £325,000.
