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Changes for 2018/19

Dividends

The tax-free dividend allowance will reduce from £5,000 to £2,000 from 6 April 2018.

Income tax rates

The bands and rates at which people in Scotland pay income tax have been significantly changed for 2018/19, but it will be business as usual for taxpayers in the rest of the UK.

The following income tax bands and thresholds will be in place from 6 April 2018:

Table 1 - Taxable income bands and tax rates

  2018/19  2017/18 
  Starting rate* of 0% on savings up to  £5,000  £5,000
 Basic rate band  £34,500  £33,500
 Higher rate band  £34,501 - £150,000  £33,501 - £150,000
 Additional rate band  Over £150,000  Over £150,000
 Basic rate  20%  20%
 Higher rate  40%  40%
 Additional rate  45%  45%
 Dividend ordinary rate  7.5%  7.5%
 Dividend upper rate  32.5%  32.5%
 Dividend additional rate  38.1%  38.1%

*The starting rate does not apply if taxable non-saving income exceeds the starting rate limit.

Table 2 - Allowances that reduce taxable income or are not taxable

  2018/19 2017/18 
 Personal allowance*  £11,850  £11,500
 Personal savings allowance:    
 Basic rate taxpayer  £1,000  £1,000
 Higher rate taxpayer  £500  £500
 Dividend allowance  £2,000  £5,000
 Marriage allowance**  £1,185  £1,150
 Trading allowance*** £1,000   £1,000
 Property allowance***  £1,000  £1,000
 Rent a room allowance  £7,500  £7,500
 Blind person's allowance  £2,390  £2,320

    *The personal allowance is reduced by £1 for each £2 of income from £100,000 to £123,700 (2017/18, £123,000).
  **Any unused personal allowance maybe transferred to a spouse or civil partner who is not liable to higher or additional rate tax.
***Note that landlords and traders with gross income from this source in excess of £1,000 can deduct the allowance
from their gross income as an alternative to claiming expenses.

Table 3 - Scotland

Band Taxable income 2018/19 Rate*
Personal allowance** Up to £11,850 0%
Starter rate*** £11,851 to £13,850 19%
Basic rate £13,851 to £24,000 20%
Intermediate rate*** £24,001 to £43,430 21%
Higher rate £43,431 to £150,000 41%
Top rate Above £150,000 46%

    *Non-savings, non-dividend.
  **The personal allowance is reduced by £1 for each £2 of income from £100,000 to £123,700 (2017/18,£123,000).
***Indicates two new bands introduced for 2018/19.

Auto-enrolment

Businesses need to be aware that from 6 April 2018, the minimum employer contribution towards an employee's workplace pension will increase from 1% to 2%.

These contributions are mandatory for workers aged between 22 and state pension age, earning more than £10,000 a year.

National living wage and national minimum wage

National minimum wage rates for all ages and apprentices are increasing from 1 April 2018.

For 18 to 20-year-olds and 21 to 24-year-olds, it will be the largest increase in a decade.

National living wages and national minimum wages rates (2018/19)

Over-25s £7.83
21-24 £7.38
18-20 £5.90
16-17 £4.20
Apprentices £3.70

Pensions

Pensions escaped an overhaul in Autumn Budget 2017 as the chancellor opted to leave the current system unchanged, apart from an increase to the lifetime allowance.

The lifetime allowance, which is the maximum amount an individual can draw from pensions without incurring extra tax charges, rises to £1.03 million from 6 April 2018.

ISAs

The overall annual ISA subscription limit remains at £20,000, although the Junior ISA allowance increases to £4,260 from 6 April 2018.

The £20,000 limit may also be used to invest in a Lifetime ISA, which has a maximum allowance in 2018/19 of £4,000.