Budget Recap – Changes Taking Effect from April 2018

 

Published: 30th March 2018
 
Last November, the Chancellor Philip Hammond, announced the Budget for 2018/19, with most changes taking effect from 1st April.  We recap on the measures that are most likely to affect young people now and in the near future.

 

 

Key Points at a Glance

Tax – Personal Allowance raised
Low earners – minimum wages increased
Benefits – Universal Credit rollout
Transport – trial of new railcard for under 30’s, tax hike on new diesel cars
Shareholders – tax-free dividend allowance cut

Other changes that were covered in the Chancellor’s recent Spring Statement include:
Housing – more affordable homes in London
Business owners – business rates rises cut sooner, plus more frequent revaluations
Future policies under discussion including a plastics tax, the end of pennies, and fairer taxing of tech giants

 

Employees/Self-employed

Millions of people will pay a little less tax, as a result of a rise in tax allowances and thresholds.

Tax pay

As announced in the Autumn Budget, from 1 April 2018 you can earn more before you start paying any income tax.  The tax-free Personal Allowance increases (in line with inflation) from £11,500 to £11,850. The saving for a basic rate taxpayer is £70 a year and a higher-rate payer will take home an extra £340.

The threshold at which you start paying higher rate income tax (40%) rises from £45,000 to £46,350. There is no change to the top additional tax rate, which applies to earnings above £150,000.

 

Low earners

The National Living Wage increases from £7.50/hour to £7.83/hour, which brings in an extra £600 a year for a full-time worker. The Government aims to get the wage to £9 by 2020.

 

 

What is the National Living Wage?

The lowest wage that can legally be paid to employees aged 25+.
It is supposed to reflect the amount someone needs to earn to cover the basic costs of living and lead a decent life.

 

 

The National Minimum Wage (paid to Under 25’s) also goes up

21-24 year olds 18-20 year olds 16 & 17 year olds Apprentices
£7.38/ hour £5.90/ hour £4.20/ hour £3.70/ hour

Check here to see if you’re earning the legal minimum, or if you’re owed payments from past years.

Note most interns should be paid at least the minimum wage, whatever the length of your internship. If there are any problems, you should take it up with your employer in the first instance, and if it remains unresolved, get advice from Acas, or report it to HMRC, who will investigate.

 

Benefit claimants

Universal Credit is a major reform to the way benefits are paid, which aims to simplify the welfare system. Despite many setbacks, it is now being rolled out across the UK in phases, to be completed by December.

 

 

What is Universal Credit?

Universal Credit is a new means-tested benefit, which replaces 6 existing benefits, merging them into one monthly payment (Income Support, income-based Jobseeker’s Allowance, income-related employment and support allowance, Housing Benefit, Child Tax Credit and Working Tax Credit).
 

 

Commuters

New Millennials travel card – a £30 railcard for discounted train travel for everyone up to age 30, which is an extension of the current young person’s railcard for 16 to 25 year olds. It gives up to a 1/3 off non-peak fares, but can’t be used on season tickets.

10,000 cards were launched last month (as a trial), but strong demand crashed the website on the first day and they very quickly sold out – not impressive! If you want one, National Rail advise that you continue to try the National Railcard website and keep checking @_Railcards Twitter and Facebook pages for updates.

 

Drivers

Car taxTax hike for diesel – From 1 April, new diesel cars that don’t meet the latest emissions standards, will be charged a higher rate in road tax for the first year (one tax band higher than petrol cars). The increase is about £20 for smaller cars and £300 for larger vehicles.

If you’ve already got a diesel car, you won’t pay more – it applies to new diesel cars bought from April 2018 onwards.

 

Shareholders

The tax-free allowance on dividends takes a dive (from £5,000 to £2,000). That’s bad news for small business owners who pay themselves in dividends, or for heavy investors. (Stocks & Shares ISAs remain tax-free).

 

Tax on Dividends 2018-19

Tax Band Tax Rate on Dividends
over £2,000
Extra Tax Bill
Basic rate 7.5% £225
Higher rate 32.5% £975
Additional rate 38.1%  £1,143

Source: it contracting: April 2018 Dividend Allowance cut – how much will it cost you?

 

Sources:

Autumn Budget 2017: 25 things you need to know – GOV.UK

Autumn Budget 2017 – BBC News

 

 

 

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