Jane Foy, Senior Manager for Tax at Deloitte in Belfast, explains some of the key changes to be aware of
“There are a number of changes to be aware of in April. The most significant one is around termination payments where higher tax may arise.
“We will also see the divergence of Scottish tax bands and rates for earned income from those of the rest of the UK, which may cause some confusion. Scottish taxpayers earning more than £26,000 will have a higher liability compared to residents elsewhere in the UK.”
Air Passenger Duty (APD)
APD rates for flights over 2,000 miles (‘Band B’ destinations) increase on 1 April. Reduced rates will rise by £3 (to £78), standard rates will rise by £6 (to £156), and higher rates will rise by £18 (to £468).
The Annual Tax on Enveloped Dwellings (ATED) annual charges will rise by 3% from 1 April (with the ATED increase rounded down to the nearest £50).
Properties on which ATED is payable need to be revalued to the 1 April 2017 value for the purposes of the 2018/19 ATED charge (assuming the property was owned on this date). A professional valuation/pre-return banding check may be appropriate.
The 2018/19 ATED charges are as follows:
|Property value (for ATED purposes)||2018/19 ATED charge|
|£500,001 – £1,000,000||£3,600|
|£1,000,001 – £2,000,000||£7,250|
|£2,000,001 – £5,000,000||£24,250|
|£5,000,001 – £10,000,000||£56,550|
|£10,000,001 – £20,000,000||£113,400|
Company Cars & Vans
The percentages for calculating company car benefits in kind will increase by 2% for most cars. The cleanest electric cars will be taxed at 13% of list price, rising up to 37% for cars emitting 180g/km or more. Diesel supplement will be an additional 4% of list price. (Except for cars certified to the RDE2 standard.)
The benefit in kind for private fuel provided in company cars or vans will be calculated at the relevant percentage x £23,400. The van benefit charge will increase to £3,350 and the fuel benefit charge for vans will increase to £633.
Income tax rates and bands
As of the 6th April, the personal allowance will be increased from £11,500 to £11,850, and the basic rate band from £33,500 to £34,500, giving a higher rate threshold of £46,350 for 2018/19. The rate bands for 2018/19 are 20% on taxable income up to £34,500 and 40% on income between £34,501 and £150,000.
Scottish residents are subject to Scottish rates of income tax from 6 April. For 2018/19, a new starter rate of 19% will apply to incomes between £11,850 and £13,850. The basic rate of income tax of 20% will continue to apply between £13,850 and £24,000 and a new intermediate rate of 21% will be introduced for income between £24,000 and £43,430. Higher rate tax on income between £43,430 and £150,000 is increased to 41% and additional rate tax for income above £150,000 is also increased from 45% to 46%. These new Scottish rates apply to non-savings income only (generally earnings). The tax rates applicable to savings and dividend income continue to be set by Westminster.
The inheritance nil rate band remains at £325,000 for 2018/19. The residence nil rate band which was introduced in 2017/18 will increase from £100,000 to £125,000 for deaths in 2018/19, £150,000 for deaths in 2019/20 and will rise to £175,000 for deaths on or after 6 April 2020. It is tapered at £1 for £2 for estates over £2m.
The ISA annual subscription limit remains at £20,000. For junior ISAs and child trust funds, the limit will be increased to £4,260 on 6 April 2018
Low-emission cars – capital allowances and care hire restrictions
Certain CO2 emission thresholds within the Capital Allowances Act will change with effect from 1 April 2018:
- 100% first year allowances under CAA 2001 s 45D will be available only for electrically-propelled cars, or cars with an emissions figure not exceeding 50 grams per kilometre (previously 75 grams per kilometre).
- Expenditure on cars with an emissions figure exceeding 110 grams per kilometre (previously 130 grams per kilometre) will qualify for capital allowances only in the special rate pool.
Marriage Tax Allowance
The Marriage Allowance allows a transfer 10% of one spouse’s personal allowance to the other, reducing their overall tax bill by up to £238 a year in 2018/19. The government will now allow claims in cases where a partner died before the claim was made. These claims can be backdated by up to 4 years.
In 2018/19, the NIC rates will be as follows:
|Earnings per week||Rate of tax||Earnings per week||Rate of tax|
|Over £892||13.8%||Over £892||2%|
|Class 2 (self-employed)||£2.95 per week (small profits threshold £6,205)|
|Class 3 (voluntary)||£14.65 per week|
|Class 4 (self-employed)||Profits up to £8,424|
Profits from £8,424 to £46,350
Profits above £46,350 per annum
From 2018/19, the lifetime allowance will increase from £1m to £1,030,000. This will come into effect as of 6 April 2018.
There will be further restriction of mortgage interest on rental properties.
Phasing in since 2017/18 to 2020/21, the deduction for mortgage interest in respect of let properties will continue to be restricted to a basic rate tax reducer from 6 April 2018. In 2018/19, finance costs on residential properties will be further restricted such that only 50% finance costs will be an allowable deduction (down from 75% in 2017/18) and the remaining 50% will be given as a basic rate tax reduction (up from 25% in 2017/18). These percentages reduce and increase respectively over the period so that solely a basic rate reducer is available by 2020/21.
Land Transaction Tax (LTT)
From 1 April, Land Transaction Tax LTT will replace UK Stamp Duty Land Tax (SDLT) in Wales.
A 0% rate applies to the first £5,000 of taxable savings income, although this rate will only affect people with non-savings income of less than £16,850 (in 2018/19). The dividend nil rate band will be reduced to £2,000 of dividend income (from £5,000 in 2017/18) and the savings nil rate will remain at the same rates as 2017/18 (£1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers
Payments in lieu of notice (PILONs) will become subject to tax as earnings and Class 1 NIC where an employment is terminated after 5 April 2018 and any termination payment is also made after that date, subject to a new statutory formula. The balance of any termination award exceeding £30,000 will also become subject to Class 1A NIC, but this will come into effect from 6 April 2019, having been delayed by a year. Injury to feelings will be excluded from the definition of “injury or disability”.
Foreign Service Relief for employees who have had international careers will no longer be available for any employees who are UK resident at the time of termination, if after 5 April 2018. These employees will have to rely on international tax treaties for any relief in future.
Vehicle Excise Duty (VED)
From 1 April 2018, VED rates for cars, vans and motorcycles will increase.
A diesel supplement is also being introduced from 1 April 2018. The supplement applies to diesel vehicles registered from 1 April 2018 which do not meet the EU Real Driving Emissions 2 (RDE 2) standard, with the effect that these cars will go up by one VED band when determining the VED rate that applies.