Changes to Income Tax, Council Tax, and Pension Contributions in 2018

 

Changes to Income Tax, Council Tax, and Pension Contributions in 2018

As you already know, the new tax year began on 6th April. Earlier this month, new tax rules came into effect which will apply until 5th April 2019. Some of them could save you money, such as the changes to Inheritance Tax. The IHT allowance remains frozen at £325,000 for 2018-2019. But if your estate includes your home, your allowance can go up by an additional £125,000. This rose from £100,000 in the last tax year. It means that should anything happen, your heirs will inherit more tax-free money. On the downside, some tax changes could mean you will be paying more. Drivers who bought their car after 6th April 2017 will be paying new Vehicle Excise Duty tax rates this year. The introduction of the controversial “sugar tax” means that fans of soft drinks will be out of pocket. See below for the most important tax changes regarding income and living costs.

Reductions to Income Tax

One positive change for the 2018-2019 tax year is an increase in Personal Allowance. This is the amount of tax-free income you can earn in the year. People who are in the basic rate tax band previously paid 20% tax on earnings from £11,501 – £45,000. From 6th April 2018, the standard tax-free allowance is £11,850. Anyone who earns less than this will not have to pay any income tax. The basic rate tax band is now £11,501 – £46,350. This means that people earning between £45,001 – £46,350 in a year will go down a tax band from last year. Only those earning £46,351 – £150,000 will have to pay the higher rate of 40% tax. The additional rate of 45% still applies for earnings above £150,000. However, anyone earning more than £123,700 doesn’t get a Personal Allowance. For every £2 over £100,000, the Personal Allowance decreases from £11,850 by £1.

Pension Contributions Increase

With a higher Personal Allowance, you could be taking home a little extra each month. However, depending on your salary, it is not likely to be much. This is because the new increase in pension contributions will impact your income tax savings. This applies to employees who take part in an automatic enrolment pension scheme. With these workplace schemes, you will pay a percentage of your earnings towards your pension. Depending on how much you earn, your employer also contributes to your pension. The government will add money to your pension if you pay income tax and pension contributions. Previously, employees paid 1% and employers would match this. From April 2018, employers will pay 2% and employees must pay 3%. Next year this is due to rise again to 3% for employers and 5% for employees. The retirement age will increase to 68 by 2037.

Changes to Income Tax, Council Tax, and Pension Contributions in 2018

Council Tax Rises

It may be a mild annoyance that you can’t have the money now, but pension contributions are important. These savings will support you later in life when you eventually retire. However, an increase in another area will also affect your income. Whether you pay rent or a mortgage, you also have to pay Council Tax. This is particularly unfair for renters, as the value of the property determines the tax rate rather than the resident’s income. It is important to pay Council Tax as well, though, because it goes towards local council services. These include waste collection and recycling, maintenance of public spaces, social care, and the police and fire services. The largest increase in Council Tax in the last 14 years will still be a blow for many people. Government cuts to funding have left councils desperate to raise the money they need to provide public services.

What this means is that many taxpayers will face a Council Tax increase of 5.99% this year. The cap for a Council Tax hike without consulting residents is 2.99%. Authorities offering social care for adults are allowed a 3% precept on top of this. Councils do not have to hold a referendum if the increase is less than 6%. Councils can and will raise the tax by the maximum of 5.99% without needing resident approval. If they want to raise Council Tax by more than this, they will have had to hold a vote. Pembrokeshire will see the highest tax increase at 11.04%. Wiltshire residents will face a 6.41% rise in their Council Tax, while East Northamptonshire will pay 6.15% more this year. In Bradford, Council Tax bills will go up by 6.05%. Besides these, 32 councils across England will implement increases from 5.8% – 5.99%. This includes Wirral, St. Helens, and Brighton and Hove.

Be sure to check your Council Tax payments for the 2018-2019 tax year. The amount will depend on the property value tax band your home fits into. You can enter your postcode here to find out which tax band your property is in. These will usually range from lower value properties in Band A to higher value properties in Band D. Once you know your tax band, visit your council’s website to find out the local tax rate for your band. You could arrange to pay your Council Tax online as well.

How to get your UTR number if you have lost it

How to Get a UTR Number

When you register as self-employed with HMRC, they will assign a Unique Taxpayer Reference number to you. This 10-digit UTR number is unique to you or your company. You will need this number to manage your taxes, including self-assessment tax returns. This guide will assist you in finding your UTR number. You can call HMRC on 0844 453 0158 if you need any more help.

What If I’ve Lost My UTR Number?

Once you register with HMRC, they will normally include your UTR number in all correspondence. You should be able to find it on official documents and letters from HMRC. Look for the 10-digit number on your “welcome to self-assessment” (SA250) letter or notices to file tax returns. It will be on previous self-assessment tax returns as well as your statement of account and payment reminders. You should keep all of these documents and store them safely for your records. The number might say “tax reference” next to it on the documents. You will also be able to find your UTR number by logging into your online account with HMRC. If you can’t find your UTR number, then you should call the Self Assessment helpline on 0843 178 4198. HMRC can find it for you.

Why Do I Need a UTR Number?

HMRC uses UTR numbers to identify everything to do with your taxes. You need one if you earn any income outside of the PAYE scheme. To get a UTR number, you must register with HMRC as an individual, limited company, or other organization. Usually, if you do this, then you must report your own taxable income to HMRC. You can check online to see if you need to fill out a tax return yourself. If you do need to file a self-assessment tax return, you will be able to do this online. To use your online account, you will need to activate it using a code which HMRC will send to you by post. Receiving your UTR number and this code can take up to 20 days. This is why is it important to keep track of your taxes. You could end up paying penalty fines as well as overdue income tax.

How to Register for Self-Assessment

If you are new to self-assessment, you can register online. This will enrol you in the online service and generate your UTR number, which HMRC will send to you by post. They will also send a letter containing the activation code you will need to log in for the first time. HMRC usually sends these letters within 10 working days (or 21 working days if you are abroad). You can also register over the phone by calling the Self-Employed helpline on 0843 178 4180. It will take the same amount of time to receive your letters. To avoid fines, you must register by 5th October in your company’s second tax year. You have to register for Self Assessment and Class 2 National Insurance if you earned more than £1,000 from self-employment in the last tax year (between 6th and 5th April).

What Do I Need to Register?

Whether you apply for your UTR number online or by phone, you will need to provide evidence. HMRC will ask you for a series of details. You should make sure that you have all of these ready:

  • your name
  • your address
  • National Insurance number
  • date of birth
  • contact phone number and e-mail address
  • self-employment start date
  • the nature of your business
  • business address
  • business contact phone number
  • UTR number if you were previously Self-Assessed
  • business UTR number if you’re joining a partnership

You will also need to provide all of this information if you register by post. To register in this way, you must fill out an online form then download and print it. The form will include the address you need to send it to. This additional postage time means it will take even longer to receive your UTR number. When you have to file your self-assessment tax returns, you can also send them by post.

 

What you Need to Know About the New Tax Year

tax year 2018

In the UK, the tax year runs from April 6th until April 5th the following year. If you haven’t done so already, you will need to fill in a tax return. If you haven’t created a return yet, you will be notified by the HMRC that you need to do so. If you are unsure on if you need a tax return, you can check on the government website. In general, you will need to create a tax return if you are self-employed, or if you earn an income part time away from your full-time job.

Who needs to file a Tax Return?

Tax Returns are not just for those who are self-employed. You will need a tax return if you fall under any of the following:

  • Your taxable income is above £100,000
  • You have an income from abroad
  • If you have earned money from selling a second home, shares or other assets
  • You or your partner’s income exceeded £50 000 when claiming Child Benefit
  • Your income from any savings is £10,000 or more before tax

There are other factors that contribute to whether you will need to fill in a self-assessment for the HMRC. If you are still unsure of whether you’re eligible to file a tax return, call the HMRC Helpline, where a member of staff will be able to help you further. If you are in full-time employment and do not earn money outside of your contracted job, any tax you owe will be automatically deducted each month from your pay. You will not have to set this up, as it is automatically put in place by your employer. If you believe you are on the wrong tax code, if you have been paid too little tax, or if you believe that the HMRC owes you money from emergency tax, we suggest calling the HMRC Tax Code Contact Number.

Important Dates for the 2018 Tax Year

  • January 31st – The first payment of the tax year
  • April 5th – This is the end of the previous tax year, and means that if you need to file a return, that you should do so before this date. This might be different if you are newly self-employed, as you may only need to file a return the following April.
  • July 31st – The second payment of the year
  • October 5th – This is when you need to speak to the HMRC about your capital gain and further income aside from your regular income. You also need to register as self-employed by this date.
  • October 31st – You will need to send your paper tax return by this date. Sending your paper tax return after this date might mean that you are charged a penalty fee
  • December 31st – When filing a tax return online, this is the date in which it will need to be submitted.