New tax rates and allowances for 2018/19

Pensions, ISAs and Junior ISAs

We believe it makes good sense to make the most of your ISA and pension allowances as early as possible each tax year. This helps you to maximise both the potential for investment gains and the length of time your money is protected from tax charges.

Individual Savings Accounts (ISAs)  

	2017/18	2018/19
ISA allowance	£20,000	£20,000

Junior ISAs

	2017/18	2018/19
Junior ISA allowance	£4,128	£4,260

Child Trust Funds (CTFs)

	2017/18	2018/19
CTF allowance	£4,128	£4,260

Pensions

	2017/18	2018/19
Annual allowance	£40,000	£40,000
Lifetime allowance	£1,000,000	£1,030,000

Unused annual allowances from the previous three tax years may be carried forward. The 2018/19 annual allowance is subject to 50% taper down to £10,000 if your threshold income is over £110,000 and adjusted income over £150,000. From 6 April 2018 the lifetime allowance increased in line with the Consumer Prices Index. There is a 55% lifetime allowance tax charge if the excess is drawn as a lump sum, and a 25% charge if the money is taken as income.

Income Tax rates

2017/18		2018/19
Band (£)	Rate (%)	Band (£)	Rate (%)
Nil - 33,500 (Basic)	20	Nil - 34,500 (Basic)	20
33,501 - 150,000 (Higher)	40	34,501 - 150,000 (Higher)	40
Over 150,000 (Additional)	45	Over 150,000 (Additional)	45

Your first £5,000 of savings income is tax-free if you meet the non-savings income requirements. From 6 April 2016 the 10% tax credit on dividends was removed. There is a £2,000 dividend allowance (effectively a 0% rate). Above £2,000 dividends will be taxed at 7.5% (for basic and standard rate taxpayers), 32.5% (for higher-rate taxpayers) and 38.1% (for additional-rate taxpayers).

The basic personal allowance has increased from £11,500 to £11,850. From 2016/17 onwards, all individuals are entitled to the same personal allowance, regardless of their date of birth. This is reduced by £1 for every £2 of income over £100,000.

In addition, a new Personal Savings Allowance (PSA) lets you earn up to £1,000 interest (or £500 if you are a higher-rate taxpayer) in savings with no Income Tax to pay.

For the 2018/19 tax year, the Scottish Parliament have set up new Income Tax rates and bands. You can see the changes to the Scottish Income Tax rates here. 

Capital Gains Tax – individuals

	2017/18	2018/19
Exemption	£11,300	£11,700
Standard rate	10%	10%
Higher rate	20%	20%
Additional rate	20%	20%

There will be an additional 8% surcharge to be paid on residential property (excluding main home).

Inheritance Tax

	2017/18	2018/19
Nil rate band	£325,000	£325,000
Residence nil rate band	£100,000	£125,000
Rate of tax on excess	40%	40%

Reduced tax charge on gifts made within seven years of death:

Years before death	0-3	3-4	4-5	5-6	6-7
% of IHT charged	100	80	60	40	20

Up to 100% of the unused proportion of a deceased spouse or civil partner’s nil rate band and residence nil rate band can be claimed on the survivor’s death.

The residence nil rate band is a new allowance for passing on the family home. The allowance is currently £125,000 and will increase over the next two years, up to £175,000 in April 2020. The residence nil rate band is tapered down for people with larger estates – it will reduce by £1 for every £2 that your estate is valued over the £2 million mark.

The rate of Inheritance Tax reduces from 40% to 36% where at least 10% of net chargeable estate is left to charity.

Speak to a financial planner

For more information about using your tax allowances, why not book a no-obligation consultation with a financial planner from our wider Tilney Group. Simply complete this short online form, call us on 020 7189 2400 or email best@bestinvest.co.uk.