Here are the main tax rates and allowances for 2018/19 that are most relevant to small businesses.
- You have to pay 19% Corporation Tax if your profit falls below £300,000.
- If your annual profit exceeds £300,000 then you have to also pay 19% Corporation Tax. You can find out more in our corporation tax guide.
Value Added Tax (VAT)
- You have to register for VAT if your turnover over the past 12 months is £85,000 or more.
- The de-registration threshold is £83,000.
- Tax on dividends is paid at a rate set by HMRC on all dividend payments received.
- Anyone with dividend income will receive £2,000 tax-free, no matter what non-dividend income they have.
- Dividend basic rate is 7.5%. £0 to £34,500 on taxable income over the Personal Allowance In England.
- The dividend higher rate is 32.5%. £33,501 to £150,000 on taxable income over the Personal Allowance In England
- Dividend additional rate is 38.1%. Over £150,000 of taxable income.
Income Tax – Personal Allowance
- The personal allowance (the amount you can earn before any income becomes taxable) is £11,850.
- If your income is higher than £100,000 this year, you lose £1 of this personal allowance for every £2 you earn above this threshold, until it reaches £0.
- Therefore you will not receive a tax-free personal allowance at all if you earn £123,700 or more.
Income Tax Bands
- The basic rate band is 20% and applies to income up to £34,500.
- The higher rate band is 40% and applies to income from £34,500 to £150,000.
- The upper (additional) rate band is 45% and applies to income of £150,000 and above.
National Insurance Contributions (NICs)
- If you run a company (or work for one), then Class 1 NICs apply.
- Employees’ Class 1 NICs are payable at 12% on salaries received between £162 and £892 per week. Any earning above the upper earning limit (£892) will be taxed at 2%.
- Employers’ Class 1 NICs are payable at 13.8% on earnings above £162 per week.
- For sole traders and partnerships, you pay Class 2 and Class 4 NICs.
- Class 2 NICs are payable at £2.95 per week, and are paid by anyone earning £6,205 or more through self-employment during the tax year.
- Class 4 NICs are paid on profits you make as a self employed person. The Class 4 NI rate is 9% of annual profits between £8,424 and £46,350, and an additional 2% on profits above £46,350 per year.
- Read our guide on National Insurance for further information.
Pensions Savings Tax Relief
- The annual allowance limit remains at £40,000.
- The maximum tax free lump sum is 25% of your pension pot.
Individual Savings Accounts (ISAs)
- The overall ISA investment limit remains £20,000.
Capital Gains Tax
- If you pay higher rate income tax you’ll pay 28% on your gains from residential property, and 20% on your gains from other chargeable assets.
- If you pay basic rate income tax you’ll pay 18% on your gains from residential property, and 20% on your gains from other chargeable assets.
- You’ll pay 10% if you’re a sole trader or partnership and your gains qualify for Entrepreneurs’ Relief.
- Each individual has an annual CGT exemption of £11,700.
- The Annual Investment Allowance (AIA) is £200,000 and has remained at this since 01/01/2016.
- First year allowances remain at 100%.
- Find the rateable value (RV) of your business and multiply by the applicable multiplier below.
- There are two multipliers: standard non-domestic rating multiplier is 49.3p for 2018/19 and small business non-domestic rating multiplier is 48.0p for 2018/19.
- Businesses with a RV of less than £51,000 use the small business multiplier, if RV is £51,000 or more use the standard multiplier.
- The Inheritance Tax Threshold (IHT) remains at £325,000. The standard inheritance tax rate is 40% of anything over the £325,000 threshold.
Stamp Duty Land Tax
The SDLT regime rates are as follows, charged on a progressive basis (i.e. no longer just on the band into which the purchase price falls):
- Up to £125,000 – no tax
- £125,001 – £250,000 – 2%
- £250,001 – £925,000 – 5%
- £925,001 – £1,500,000 – 10%
- £1,500,000 or more – 12%