The start of the new tax year brings a raft of changes that have consequences for your personal finances.
At the same time, the higher-rate, 40pc, tax threshold is to increase to £46,350 from £45,000.
Since the 6th April 2016, the way dividends are taxed has changed (7.5% above the amount £5.000).
Many of our clients received the information that their tax code has been changed.
The HMRC tax office expects that in the next tax year 2018/19, the director will have the right to receive a similar amount of dividend and that is the reason why they take tax dividend in advance.
Primus do not recommend that you change your salary due to the reduced tax code to dividend tax. It might seem tempting but this solution definitely will contribute to an undeniable increase of Corporation Tax and also dividend tax.
Monthly payment for National Insurance Contribution class 1 for directors based on monthly salary £987.50 will be £73.66.
The above amount does not include Employment Allowance (exemption from employer’s NI contributions). Please note that you cannot apply for an exemption if the director is the sole employee of the company.
In addition, the employment of a second employee does not automatically mean the possibility of applying Employment Allowance, because the salary of this second employee must exceed the Secondary Threshold (ST), it means this employee must also pay NIC contributions.
– The NLW, which applies to those aged 25 and over, will increase from £7.50 to £7.83 per hour;
– The NMW for 21- to 24-year- olds will increase from £7.05 to £7.38 per hour;
– The NMW for 18- to 20-year- olds will increase from £5.60 to £5.90 per hour;
– The NMW for 16- and 17-year- olds will increase from £4.05 to £4.20 per hour;
– The apprentice rate of the NMW, which applies to apprentices aged under 19 or those aged 19 or over and in the first year of their apprenticeship, will increase from £3.50 to £3.70 per hour.
On 6 April 2018, all employers will be required to increase the minimum contribution from the current level of 2% of qualifying earnings to 5%. The minimum contribution employers and staff pay into their automatic enrolment pension goes up to 2% for employers and 3% for employees.
Further increases in rates are scheduled for April 2019 (3% employer contribution and 5% employee contribution), so you will need to factor this in to your budget for the forthcoming year if you are currently paying the minimum 1%.
So, the first £2,000 of dividends are not taxed at all, the basic rate band for dividend above £2.000 is 7.5%.
It may also be a different situation related to the fact that limited companies pay for:
Above benefits in kind are taxable, tax is paid on the taxable value of the benefit. HM Revenue and Customs defines this as the cash equivalent value. It is necessary to inform the accountant in
advance about paying benefit in kind. The accountant will recognize the tax obligation and make an appropriate notification to HMRC.
If you plan to register benefit in kind, you must make a proper notification on the HMRC website in March 2018. Then taxes from will be paid on a current basis. Otherwise, the company must submit the P11D document once a year and the director’s taxes connected to benefit in kind will be collected by changing the tax code in the next tax year
We invite you to read our article about IR35.