Tax Rates and Allowances for Small Businesses – 2018/19

April 9, 2018

Here are the main small business tax rates and allowances for the tax year of 2018/19.

Corporation Tax

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.

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%. £34,501 to £150,000 on taxable income over the Personal Allowance In England
Dividend additional rate is 38.1%. Over £150,000 of taxable income.

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.

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.

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 NIC 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.

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.

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):