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Small and medium enterprises (SMEs) can’t afford to sit still. The best businesses in today’s climate are the ones that are constantly adapting to the environment around them. The arrival of a new tax year demands further adjustments as new regulations come into force.

This April sees a number of changes that directly affect SMEs, and it’s important to remain aware of their potential influence as we move into the 2018/19 tax year.

Personal allowance and tax threshold changes

It’s always good to stay on top of any tax threshold changes, regardless of the size of your business. This helps keep your payroll procedures accurate and makes managing your personal finances easier too.

For 2018/19, the Government has implemented a £350 increase in annual employee personal allowance, meaning they are now entitled to £11,850 tax-free during the tax year.

Those earning up to £34,500 will be taxed the basic rate of 20% after personal allowance deductions, those on between £34,501 and £150,000 will be taxed 40%, and the additional tax rate of 45% will apply to those above that threshold.

Dividend tax allowance reduced from £5,000 to £2,000

Whilst personal allowance and tax thresholds are rising, the tax-free dividend allowance is taking a rather dramatic drop for limited company directors.

From April 2018 onwards, you’ll only be able to draw out £2,000 (rather than £5,000) before having to pay dividend tax. Directors will have to pay a higher amount of tax on their yearly dividends if they exceed this amount.

National Minimum Wage rate increases

The National Minimum Wage is the least possible amount of pay per hour that employees are entitled to by law. These rates tend to rise by the year and, as of April 2018, the following rates apply:

  • Aged 25 and above (National Living Wage rate) – minimum £7.83 p/h
  • Aged 21 to 24 – minimum £7.38 p/h
  • Aged 18 to 20 – minimum £5.90 p/h
  • Aged under 18 – minimum £4.20 p/h
  • Apprentices aged under 19 or in the first year of their apprenticeship – minimum £3.70 p/h

SMEs will need to take care that they budget for, and adhere to, the new changes. This is pertinent information to the hospitality sector in particular, as many staff hired will be on the National Minimum or Living Wage.

Choose Nabarro Poole for your accounting solutions in 2018/19

As always, a fresh tax year can feel like a whole new chapter for your business, so get it started on the right note by hiring a professional accountancy firm to handle your finances for you.

Our Manchester accountants can help you adapt to these changes and ensure you enjoy the best possible financial year during 2018/19. Give us a call on 0161 998 4276 today to arrange a free consultation – we’ll be happy to answer any questions you might have.