Small Business Accountancy News | SMC Accountants

Avoid Tax Legally

Make a personal contribution to a pension

Personal contributions are paid net of basis rate income tax (currently 20%) and has the effect of expanding your basic rate income tax band. Pension contributions can also enable you to restore the loss of personal allowance where total taxable income is between £100,000 and £114,950.

Employer Contribution to a pension (salary sacrifice)

If you are employed (even if the company is controlled or owned by you), your employer can contribute to your pension fund, funded by you by sacrificing part of your salary or bonus. Where the salary or bonus is sacrificed before it has been earned, no income tax or national insurance will be due.

Other family members’ income tax bands

Should your spouse or civil partner pay tax at a lower rate than you, transferring savings to them to enable any taxable income arising to be taxed at a lower rate. The transfer must be irrevocable, with tax saving not as the sole motive.  

Offset trading losses against income

Business trading losses incurred personally, can be offset against your other income in the same year as the loss or the preceding year.


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Working Tax Credits

The minimum Working Tax Credit rates are shown below:

Working Tax Credit - £ per year

Rates 2016-17   2017-18 2018-19
Basic element £1,960   £1,960 £1,960
Couple and lone parent element £2,010 £2,010 £2,010
30 hour element £810 £810 £810
Disabled worker element £2,970 £3,000 £3,090
Severe disability element £1,275 £1,290 £1,330

Childcare element of Working Tax Credit

The maximum childcare costs you can claim for, and percentage you can get help are shown below:

Childcare element of Working Tax Credit

Rates 2016-17   2017-18 2018-19
Maximum eligible cost for one child £175 per week £175 per week £175 per week
Maximum eligible cost for two or more children £300 per week £300 per week £300 per week
Percentage of eligible costs covered 70% 70% 70%

Child Tax Credit rates

The maximum Child Tax Credit rates are shown below:

Child Tax Credit - £ per year

Rates 2016-17   2017-18 2018-19
Child Tax Credit Family Credit £545 £545 £545
Child Element £2,780 £2,780 £2,780
Disabled child element £3,140 £3,175 £3,140
Severely disabled child element £4,080 £4,465 £4,600

Tax credits income thresholds
The tax credits income thresholds and withdrawal rates are shown below:

Income thresholds and withdrawal rates - £ per year (unless stated)

Rates 2016-17   2017-18 2018-19
Income threshold £6,420 £6,420 £6,420
Withdrawal rate (per cent) 41% 41% 41%
Threshold for those entitled to Child Tax Credit only £16,105 £16,105 £16,105
Income rise disregard £2,500 £2,500 £5,000
Income fall disregard £2,500 £2,500 £2,500

Child Benefit rates
The Child Benefit rates are shown below:

Child Benefit - £ per week

Rates 2016-17   2017-18 2018-19
Eldest/only Child £20.50 £20.70 £20.70
Other Children £13.70 £13.70 £13.70

Guardian's Allowance
The Guardian's allowance rates below:

Guardian's Allowance - £ per week


Rates 2016-17   2017-18 2018-19
Guardian's Allowance £16.55 £16.70 £17.20

Income Tax rates and taxable bands 

Rates 2016-17   2017-18 2018-19
Basic rate: 20% £0 - £32,000 £0 - £33,500 £0 - £34,500
Higher rate: 40% £32,001 -  £150,000 £33,501 -  £150,000 £34,501 -  £150,000
45% from 6 April 2013 Over £150,000 Over £150,000 Over £150,000
Income Tax Allowances
Income Tax allowances 2016-17   2017-18
Personal Allowance for people born after 5 April 1948 (1)  £11,000 £11,500 £11,850
Income limit for Personal Allowance £100,000 £100,000 £100,000
Income limit for Married couple's Allowance  £28,000 £28,900
Personal Allowance for people born before 6 April 1948
Married Couple's Allowance (born before 6 April 1935 and aged 75 and over) (4)  £8,355 £8445 £8,695
Income limit for age-related allowances N/A N/A N/A
Minimum amount of Married Couple's Allowance (5) £3,220 £3,260 £3,360
Blind Person's Allowance £2,290 £2,320 £2,390
Transfererable Tax Allowance for married couples and civil partners £1,100 £1,100 £1,100
Dividend Allowance £5,000 £5,000  £2,000
Personal savings allowance for basic rate tax payers £1,000 £1,000 £1,000
Personal savings allowance for higher rate tax payers £500 £500 £500

1.   From 6th April 2017 onwards, all individuals are entitled to the same personal allowance, regardless of date of birth.
2.The Personal Allowance reduces where the income is above £100, 000 - by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
3. These allowances reduce where the income is above the income limit by £1 for every £2 of income above the limit.    
4. Tax relief for the Married Couple's Allowance is given at the rate of 10 per cent.    
5. From 6th April 2018, the new Dividend Allowance results in individuals not paying tax on the firs £5,000 of dividend income they receive. 
6. From 6th April 2016, the new Personal Savings Allowance results in basic rate tax payers not paying tax on the first £1,000 of savings income they receive. Higher rate tax payers do not pay tax on the first £500 of savings income. 

National Insurance Contributions 

Income Tax Allowances
£ per week 2016-17   2017-18 2018-19
Lower earnings limit, primary Class 1  £112 £113 £116
Upper earnings limit, primary (UEL) Class 1 £827 £866 £892
Primary threshold £155 £157 £162
Secondary threshold  £156 £157 £162
Employees' primary Class 1 rate between primary threshold and upper earnings limit 12% 12% 12%
Employees' primary Class 1 rate above upper earnings limit 2% 2% 2%
Class 1 A rate on employer provided benefits (1) 13.8% 13.8% 13.8%
Married women's reduced rate between primary threshold and upper earnings limit 5.85% 5.85% 5.85%
Married women's rate above upper earnings limit 2% 2% 2%
Employers' secondary Class 1 rate above secondary threshold 13.8% 13.8% 13.8%
Employers' contracted-out rebate, salary-related schemes 3.4% 3.4%
Class 2 rate £2.80 £2.85 £2.95
Class 2 small earnings exception £5,965 per year £6,025 per year £6,025 per year
Class 3 rate £14.10 £14.25 £14.65
Class 4 lower profits limit £8,060 per year £8,164  per year £8,424 per year
Class 4 upper profits limit £43,000 per year £45,000 per year £46,350 per year
Class 4 rate between lower profits limit and upper profits limit 9% 9% 9%
Class 4 rate above upper profits limit 2% 2% 2%
Additional primary Class 1 percentage rate on deferred employments 2% 2% 2%
Additional Class 4 percentage rate where deferment has been granted 2% 2% 2%

1. Class 1A NIC's are payable in July and are calculated on the value of taxable benefits provided in the previous tax year, using the secondary Class 1 percentage rate appropriate to that tax year.


  Internet Retailers

Internet Retailers do you know the rules for Distance Selling and consumer rights? See Distance Selling   for guidelines from the Office of Fair Trading.

Minimum wage increases from 1 October 2018

As of 1 October 2012 the National Minimum Wage increases across all age groups.(here)
Age Range from 1 Oct 16 from 1 Oct 17 from 1 Oct 18
25+ £7.20 £7.50 £7.83
21-24 £6.70 £7.05 £7.38
18-20 £5.30 £5.60 £5.90
16-17 £3.87 £4.05 £4.20

National Living Wage
The National Living Wage, introduced on 1 April 2016, is £7.83 an hour for workers aged 25 and over
The National Minimum wage will apply still for wokers aged 24 and under. 

New Rules for Late Submissions

For tax returns for the year 2016-17, the £100 late submission charge will apply regardless of whether tax is due.

When a return is more than 3 months late, there is a £10 daily penalty up to a maximum of £900. This is in addition to the initial £100.

After 6 months, there is a further fine. This is the larger of £300 or 5 per cent of the tax due.


New Pension Regime – Finance Bill

The Government has now released the 2011 Finance Bill which introduces a number of changes to the pension rules to apply from 6 th April 2011.

Contributions and Annual Allowance

  1. From 6 th April 2014, the new tax-free level of annual contribution is £40,000 per person . Contributions that exceed the annual allowance will be subject to tax .
  2. Anyone making large contributions should review their position immediately so as to ensure tha t their contributions do not exceed the new annual allowance.
  3. Any annual allowance not used from the previous three  tax years can be carried forward to the current tax year.
  4. The rules restricting tax relief for ‘high earners’ no longer apply and the new annual allowance e of £40,000 per person will apply.


Lifetime Allowance (LTA)

          i.            The Standard Lifetime Allowance is £1.030 million 6 th April 2018. Individuals who have previously registered for primary and/or enhanced protection are not affected by the change.


Register now before it’s too late

Before you can file your return or employee starter/leaver information online, you must register for and activate HMRC's PAYE Online service. Remember it takes at least seven days to get the Activation Code needed to start filing online. So it's important to register now, even if you're not yet ready to file your return and don't have any starter/leaver information to file.

Approved Mileage Allowance Increases

The amount an employer can pay an employee tax free for business journeys in an employee’s own transport has increased from 40p per to 45p per for the first 10,000 miles in a tax year. Each additional mile remains at 25p.
Where an employer pays less than these amounts, the employee can claim tax relief for the additional amount paid.
Where an employee carries fellow employees on business trips, an employer can pay up to an additional 5p per mile for each employee free of tax.


The rent-a-room relief exempting gross rent of up to £4,250 a year is available to individuals who let rooms in their own homes.

The rates and thresholds from 1 April 2018 applying are:
  • Lower rate – 0%
  • Reduced rate – 5%
  • Standard rate – 20%
  • Registration Turnover - £85,000 
  • Deregistration Turnover - £83,000.


You can use cash accounting if you estimate that your turnover during the next tax year will be no more than £1.35 million.

Once you are using cash accounting, you can keep using it until your turnover exceeds £1.6 million.


Annual turnover to enter the scheme                       up to £150,000
Must leave the scheme if annual tax turnover          exceeds £230,000


Annual turnover to enter the scheme                       up to £1,350,000
Must leave the scheme if annual tax turnover          exceeds £1,600,000

Disclaimer: This information and its contents have been produced as a helpful reference point. The information should be used as a guide only and your specific circumstances are best discussed directly with us.

No reliance should be placed on this material and no action should be taken without seeking the appropriate profesional or legal advice. Although the author make reasonable efforts to ensure the content of this information is accurate and up-to-date, the author makes no representations, warranties or guarantees that the content is accurate, complete or up-to-date and the author accepts no responsibility whatsoever for any loss occasioned by anyone acting on information within this page.
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