This follows the announcement in 2016 that the government will move to a single major fiscal event (budget) each year which will be held in the Autumn, the first of which fell on 22 November 2017.
Here, most taxpayers should find themselves with some extra cash which is good news for most, following a Budget that announced increases to the personal allowance and the basic rate band but no increases to income tax rates or National Insurance. Here is a short summary for founders to help you understand what impacts the Budget will have on your personal taxes from the 6 April 2018.
The personal allowance increase of £350 up to £11,850 from April 2018 is worth an extra £70 per tax year to basic rate taxpayers. There is also an increase in the basic rate threshold (which is the amount at which individuals start to pay tax at 40 per cent) from £45,000 to £46,350, higher rate taxpayers (those earning up to £100,000) should find themselves £20 better off per month; an extra £240 over the course of 2018/19.
There is no increase in Class 4 National Insurance Rates as previously announced, and any proposed reform is delayed until 2019. Combine this with the increase in National Insurance thresholds as highlighted by Taxation, many taxpayers earning up to £45,000 should take home an extra £8 per month.
An individual who is not liable to income tax above the basic rate may transfer up to 10% of their unused personal allowance to their spouse or civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. Married pensioners look to be the biggest winners, with those earning over £150,000 taking home an extra £57 per month. It pays for basic rate taxpayers to be married as a married couple with one basic rate earner and one child will take home a whole £1 more each month than an unmarried couple in the same position.
From the 6 April 2018, dividend allowance will be more restricted. As proposed by the Autumn 2017 Finance Bill founders relying on investment income to fund their living costs may remember that the Budget announced a reduction in the dividend allowance from £5,000 to £2,000.
Enterprise Investment Scheme (EIS)
Of particular significance for founders who are investors also, the Budget also highlighted the enhanced terms surrounding EIS, including the doubling of the amount that can be invested by individuals through EIS, from £1 million to £2million. There has also been an increase in the amount that can be invested in total in knowledge-intensive companies – from £5 million to £10 million.