UK tax year begins on April 6th and this is the date when tax changes take effect. We have already informed about the increase in the tax-free amount – British taxpayers can count on 11,850 pounds (approximately PLN 57,000) of untaxed income in 2018. Below, we also analyze additional tax changes applicable in the 2018/2019 fiscal year.
PLN 57,000 tax-free in Great Britain and new tax thresholds
The British government is breaking the trend that most European countries are following in increasing the tax burden on their citizens. Effective April 6, 2018, the regulations increase the already high tax-free allowance by £ 350 compared to the previous tax year.
See also: How will running a business in England look like after Brexit?
It gives £ 11,850 of untaxed income to all earners in the UK. The tax-free amount in Great Britain is therefore 7 times higher than the tax-free amount in Poland, amounting to 8,000 from January 1, 2018. PLN, but also in this amount is available only to the lowest earning people (for people with the minimum wage and employed for a maximum of 1/3 of a full-time job).
You can read more about increasing the tax-free amount in this article.
The change, beneficial for taxpayers, is also the amount of individual tax thresholds in force in the 2018/2019 tax year. The first tax threshold of 20% will cover income above the tax-free amount up to £ 46,350, i.e. slightly over PLN 200,000.
| UK TAX RATE | TAX YEAR 2018/19 |
| 0% rate (free amount) | £ 0 to £ 11,850 |
| 20% | £ 11,850 to £ 46,350 |
| 40% | £ 46,351 to £ 150,000 |
| 45 % | over £ 150,000 |
New Social Security Free Amount
In Great Britain, social insurance contributions are paid after exceeding the income of £ 8,424 per year (about PLN 40,400). This amount has been increased from £ 8,164 in force in tax year 2017/2018. For income between £ 8,424- £ 46,350, the NIN National Insurance contribution is 12% (for weekly income between £ 162- £ 892 plus an additional 2% above this threshold).
This is another fundamental difference compared to the social security system in force in Poland, especially for entrepreneurs. An entrepreneur running a limited company in the UK (the equivalent of a Polish sp.z o.o.) may find employment in the company and receive remuneration on this account. Therefore, if the director of the company pays the maximum income tax free of £ 11,850, he will pay only £ 693 (about PLN 285 per month) on social security. For comparison, the basic ZUS rate from January 1, 2018 is PLN 1,228 per month.
Change in tax-free dividend amount
If the company made a profit in a given fiscal year after taking into account all costs and the methods of disbursement presented above, each shareholder may pay a dividend. The dividend payment takes place after the payment of corporate corporate tax (currently 19% in Great Britain). A dividend payment of up to £ 2,000 is tax exempt (up from £ 5,000). Dividends above this amount will be taxed from 7.5% to even 38.1%. It is worth carrying out appropriate tax planning in advance so as not to fall into the highest tax threshold for dividends.
British limited company
The introduced tax changes are very beneficial for taxpayers. At a time when the Polish government increases the tax burden on entrepreneurs every year, Great Britain creates better conditions for doing business. Low tax burden and no bureaucracy are the main advantages of doing business in the UK.