How will the new tax year changes affect you?
The new tax year (which began on Friday, April 6) brings with it changes that will affect beauty businesses.
- Employers will have to contribute a minimum of 2% of pensionable pay (up from 1%) to auto-enrolment pensions, while employees will have to pay a minimum of 3%, up from 1%. Further increases will be introduced in April 2019.
- Personal allowance has increased from £11,500 to £11,850 – the amount someone can earn before having to pay income tax.
- The threshold for higher rate income tax has also increased. Those who earn £46,350 and over will now pay 40% tax on the amount over the threshold. This figure was previously £45,000.
- Scottish taxpayers will pay different rates to England and Wales for the first time. Earnings of £2,000 over the £11,850 personal allowance will be taxed at 19% rather then 20% until earnings reach £24,000, when tax rises to 21%. Above £43,430 the rate will reach 41%, with a top rate tax of 46% over £161,850.
- The threshold for dividend taxation has been reduced to £2,000 from £5,000 a year. This is the amount self-employed beauty professionals can now earn from dividend income before paying tax.
Meanwhile the VAT threshold has been frozen at £85,000 until 2020, a move welcomed by small business associations. Mike Cherry, national chairman of the Federation of Small Businesses said: “It was good to see the Chancellor respond directly to our calls for a VAT threshold freeze in the autumn. VAT is the most time-consuming tax for our members to manage, with registered small firms spending a working week every year complying with VAT obligations on average.
“There is an issue with firms approaching the £85,000 threshold and putting the brakes on. Resolving that lies in a smoothing mechanism though, not in suddenly dragging more firms into the burdensome VAT regime.”
New National Living Wage and National Minimum Wage rates were also introduced on April 1. These are now:
- £3.70 per hour for an apprentice
- £4.20 per hour for under 18
- £5.90 per hour for 18-20
- £7.38 per hour for 21-24
- £7.83 per hour for 25 and over
Read more about these changes here.