Want to know what you can earn and save this year following the recent changes to personal tax free allowances? Here are the key elements:
With a new tax year comes the now usual change to the personal allowance. The Government looks set to continue with creeping increments to the amount that can be earned before tax becomes payable, a process initiated by the coalition government. From 6th April 2018 the personal allowance increases to £11,850 and the basic rate tax band increases to £34,500, so up to £46,350 can be earnt before paying higher rates of tax.
Dividend Tax Allowance
As outlined in this article back in January, the dividend tax allowance reduced from £5,000 to £2,000. As we noted at the start of the calendar year, this reduction may prompt some to question the benefit of such a limited allowance, but it remains a tax free option and so a mixed income made up of salary and dividends does, for now, remain the most tax efficient method for extracting income for SME business owners.
ISA Savings Allowance
The amount that you can invest in an ISA in any single tax year remains at £20,000.