3 Biggest changes to your Self Assessment Tax Return
If you're self employed as a sole-trader or a partner in a business partnership you need to send your online 2017-2018 Self Assessment Tax Return before midnight on the 31st of January 2019. If you're due a payment to HMRC you should also pay this amount before this date. This article gives you an update on the changes since last year for your Self Assessment Tax Return.
1. Increases in Personal Allowance and Higher Tax rates
Your Personal Allowance is the amount of money you can earn before you start paying income tax on your earnings. For the tax year 2016-2017 this was £11,500, for 2017-2018 this has become £11,850. The biggest change happened in the higher tax rates, the moment from when you start paying 40% on your earning. This has jumped from £33,501 to £46,351 creating a significant tax saving over your earnings. For more detail on the tax rates, please visit the HMRC website on Income Tax.
2. Increase in Class 2 and Class 4 contributions threshold
Apart from the income tax you're paying on your earning, you also need to pay your Class 2 and Class 4 contributions. The Small Profits Threshold amount per year have increased from £6,025 for 2016-2017 to £6,205 for 2017-2018 and Class 2 rates have increased if you earn more than the threshold from £2.85 per week to £2.95 per week for the respective periods. The Class 4 contributions threshold has been increased from £8,164 for 2016-2017 to £8,424 for 2017-2018. The rates for Class 4 have remained the same: 9% below the upper profit limit and 2% above the upper profit limit (£45,000: 2016-2017 and £46,350: 2017-2018). More detail on the HMRC website on Class 2 and 4 contributions.
3. One of the other mayor changes in the 2018-2019 tax year in comparison to the 2017-2018 is the drop in Dividend Allowance.
In 2017-2018 you were allowed to pay yourself £5,000 without paying any dividend tax on it, for 2018-2019 this amount has dropped to £2,000. More detail on the HMRC website on dividends.
The benefits an accountant can bring to the table is being aware of these 3 and many more tax changes and tax benefits. This might save you more than your accountant charges. Additionally you have someone who answers your tax questions. If you need peace of mind we can recommend requesting quotes of the right accountants here.
If you want to know what's involved with doing the Self Assessment Tax Return yourself: please check the video from HMRC: