What he gives with one hand he takes away (more!) with the other
24th November 2017
During the November 2017 budget it was announced that the income tax personal allowance will be increased from £11,500 in 2017/18 to £11,850 in 2018/19.
In addition, the basic rate tax band is being increased from £33,500 to £34,500.
The primary threshold for class 1 national insurance is also increasing from £8,164 to £8,424.
So everyone one is better off yes……..? No!
What the Chancellor did not highlight yesterday is the previously announced reduction to the dividend allowance from £5,000 in 2017/18 to £2,000 in 2018/19.
If you were to compare the personal tax liability for a director / shareholder looking to extract £45,000 in salary and dividends in the most tax efficient method (salary up to the class 1 national insurance threshold and the balance in dividends) for 2016/17 the tax liability would be £2,137.50 and for 2017/18 it would be £2,336.20. An increase in tax of £198.70. Not such great news after all.
You might argue that the increase in salary to £8,424 mitigates the overall tax (reducing corporation tax) by £49.40, but overall the tax payable is still higher and yet another blow.
If you would like to discuss how this affects you, please contact one of our team on 01273 701200 or email email@example.com
Author: Luke Thomas, Director