As a contractor, it’s important to know the rates and thresholds when operating payroll or calculating expenses and benefits. We cover the changes in income tax rates and allowances in 2018/19. You can also scroll down a little further to see the rates, allowances and duties for tax year 2017/18.

Please click the drop-down options below to view the income tax rates and allowances.

2018/19 Income Tax Rates and Allowances

Tax Thresholds and Rates

The amount of Income Tax you deduct from your employees depends on their tax rate band and how much of their taxable income is above their Personal Allowance.

There are different rates for Scotland.

Income Tax Rate PAYE Dividends
Employee personal allowance £11,850 per year
UK basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £34,500 7.5%
UK Higher tax rate 40% on annual earnings from £34,501 to £150,000 32.5%
UK Additional tax rate 45% on annual earnings above £150,000 38.1%

 

Scotland

(Scottish Rates and Threshold only apply to non-interest and non-dividend income)

Income Tax Rate PAYE
Employee personal allowance £11,850 per year
Scottish starter tax rate 19% on annual earnings above the PAYE tax threshold and up to £2,000
Scottish basic tax rate 20% on annual earnings from £2,001 to £12,150
Scottish intermediate tax rate 21% on annual earnings from £12,151 to £31,580
Scottish higher tax rate 41% on annual earnings from £31,581 to £150,000
Scottish top tax rate 46% on annual earnings above £150,000

 

*For both UK and Scottish income tax, individuals earning over £100,000 will start losing their personal allowance by £1 for every £2 they earn above £100,000.

Income Tax Allowance

2018/19 2017/18
Dividend allowance £2,000 £5,000
Personal Saving Allowance
     – Basic Rate £1,000 £5,000
     – Higher Rate £500 £500
     – Additional Rate NIC NIC
Property Allowance £1,000 £1,000
Trading Allowance £1,000 £1,000

Class 1 National Insurance Thresholds

You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL).

Class 1 National Insurance thresholds 2018/19
LEL £116 per week | £503 per month | £6,032 per year
Primary Threshold (PT) £162 per week | £702 per month | £8,424 per year
Secondary Threshold (ST) £162 per week | £702 per month | £8,424 per year
Upper Secondary Threshold (under 21) (UST) £892 per week | £3,863 per month | £46,350 per year
Apprentice Upper Secondary Threshold (apprentice under 25) (AUST) £892 per week | £3,863 per month | £46,350 per year
Upper Earnings Limit (UEL) £892 per week | £3,863 per month | £46,350 per year

Class 1 National Insurance Rates

Employee (primary) contribution rates

Deduct primary contributions (employee’s National Insurance) from your employees’ pay through PAYE.

National Insurance category letter Earnings at or above LEL up to and including PT Earnings above the PT up to and including UEL Balance of earnings above UEL
A 0% 12% 2%

Employee (secondary) contribution rates

You pay secondary contributions (employer’s National Insurance) to HMRC as part of your PAYE bill.

National Insurance category letter Earnings at or above LEL up to and including ST Earnings above ST up to and including UEL/UST/AUST Balance of earnings above UEL/UST/AUST
A 0% 12% 2%

Class 1A National Insurance: Expenses and Benefits

You must pay Class 1A National Insurance on work benefits you give to your employees, example a company mobile phone. You report and pay Class 1A at the end of each tax year.

National Insurance class 2018 to 2019 rate
Class 1A 13.8%

National Minimum Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law.

The rates below apply from 1 April 2018.

Category of worker Hourly Rate
Aged 25 and above (national living wage rate) £7.83
Aged 21 to 24 inclusive £7.38
Aged 18 to 20 inclusive £5.90
Aged under 18 (but above compulsory school leaving age) £4.20
Apprentices aged under 19 £3.70
Apprentices aged 19 and over, but in the first year of their apprenticeship £3.70

Student Loan Recovery

If your employees’ earnings are above the earnings threshold, record their student loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay.

Rate or threshold 2018 to 2019 rate
Employee earnings threshold for Plan 1 £18,330 per year | £1,527.50 per month | £352.50 per week
Employee earnings threshold for Plan 2 £25,000 per year | £2,083.33 per month | £480.76 per week
Student loan deductions 9%

Employee Vehicles: Mileage Allowance Payments (MAPs)

MAPs are what you pay your employees for using their own vehicle for business journeys.

You can pay your employees an approved amount of MAPs each year without having to report them to HMRC. To work out the approved amount, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle.

Type of vehicle Rate per business mile 2018 to 2019
Car For tax purposes: 45 pence for the first 10,000 business miles in a tax year, then 25 pence for each subsequent mile.

For National Insurance purposes: 45 pence for all business miles

Motorcycle 24 pence for both tax and National Insurance purposes and for all business miles
Cycle 20 pence for both tax and National Insurance purposes and for all business miles

 

The above information has been obtained from HMRC and includes content we believe is of interest to our K&B Accountancy Group clients. Please follow the link below for further information on rates and thresholds for employers, including – but not limited to – maternity, paternity and shared paternity pay, statutory sick pay and company car: advisory fuel rates.

Click here for more information.

2017/18 Rates, Allowances and Duties

Tax Threshold, Rates and Codes

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

PAYE tax rates, thresholds and codes 2017 to 2018
Employee personal allowance £221 per week | £958 per month | £11,500 per year
UK Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £33,500
UK Higher tax rate 40% on annual earnings from £33,501 to £150,000
UK Additional tax rate 45% on annual earnings above £150,000
Scottish Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £31,930
Scottish Higher tax rate 40% on annual earnings from £31,931 to £150,000
Scottish Additional tax rate 45% on annual earnings above £150,000
Emergency tax code 1150L W1, 1150L M1 or 1150L X

Class 1 National Insurance Thresholds

You can only make National Insurance deductions on earnings above the Lower Earnings Limit (LEL).

Class 1 National Insurance thresholds 2017 to 2018
Lower Earnings Limit (LEL) £113 per week | £490 per month | £5,876 per year
Primary Threshold (PT) £157 per week | £680 per month | £8,164 per year
Secondary Threshold (ST) £157 per week | £680 per month | £8,164 per year
Upper Secondary Threshold (under 21) (UST) £866 per week | £3,750 per month | £45,000 per year
Apprentice Upper Secondary Threshold (apprentice under 25) (AUST) £866 per week | £3,750 per month | £45,000 per year
Upper Earnings Limit (UEL) £866 per week | £3,750 per month | £45,000 per year

Class 1 National Insurance Rates

Employee (primary) contribution rates

In order to deduct the correct amount of primary contributions (employee’s National Insurance) from your employees’ pay through PAYE, please view the employee primary contribution rates table below:

National Insurance category letter Earnings at or above LEL up to and including PT Earnings above the PT up to and including UEL Balance of earnings above UEL
A 0% 12% 2%
B 0% 5.85% 2%
C NIL NIL NIL
H (Apprentice under 25) 0% 12% 2%
J 0% 2% 2%
M (under 21) 0% 12% 2%
Z (under 21) 0% 2% 2%

 

Employee (secondary) contribution rates

Secondary contributions (employer’s National Insurance) to HMRC are paid as part of your PAYE bill. View the employer secondary contribution rates for 2017/18 below:

National Insurance category letter Earnings at or above LEL up to and including ST Earnings above ST up to and including UEL/UST/AUST Balance of earnings above UEL/UST/AUST
A 0% 13.80% 13.80%
B 0% 13.80% 13.80%
C 0% 13.80% 13.80%
H (Apprentice under 25) 0% 0% 13.80%
J 0% 13.80% 13.80%
M (under 21) 0% 0% 13.80%
Z (under 21) 0% 0% 13.80%

Class 1A National Insurance: Expenses and Benefits

Class 1A National Insurance is to be paid on work benefits you give to your employees, such as company mobile phones. This is to be reported and paid at the end of each tax year:

NI class 2017 to 2018 rate
Class 1A 13.8%

Class 1B National Insurance: PAYE Settlement Agreements (PSAs)

Class 1B National Insurance is to be paid if you have a PSA. This enables you to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees:

NI class 2017 to 2018 rate
Class 1B 13.8%

National Minimum Wage

National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. See the rates for 2017/18 below:

Category of worker Hourly Rate
Aged 25 and above (national living wage rate) £7.50
Aged 21 to 24 inclusive £7.05
Aged 18 to 20 inclusive £5.60
Aged under 18 (but above compulsory school leaving age) £4.05
Apprentices aged under 19 £3.50
Apprentices aged 19 and over, but in the first year of their apprenticeship £3.50

Statutory Maternity, Paternity, Adoption and Shared Parental Pay

The maternity and paternity calculator for employers below can be used to calculate the employee’s Statutory maternity pay (SMP), paternity or adoption pay, their qualifying week as well as the average weekly earnings and leave period.

Type of payment or recovery 2017 to 2018 rate
SMP – weekly rate for first six weeks 90% of the employee’s average weekly earnings
SMP – weekly rate for remaining weeks £140.98 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory paternity pay (SPP) – weekly rate £140.98 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory adoption pay (SAP) – weekly rate for first six weeks 90% of employee’s average weekly earnings
SAP – weekly rate for remaining weeks £140.98 or 90% of the employee’s average weekly earnings, whichever is lower
Statutory shared parental pay (ShPP) – weekly rate £140.98 or 90% of the employee’s average weekly earnings, whichever is lower
SMP/SPP/ShPP/SAP – proportion of your payments you can recover from HMRC 92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year. 103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower

Statutory Sick Pay (SSP)

The same weekly SSP rate applies to all employees. Although the amount you need to pay an employee for each day that they are off work due to illness (the daily rate) depends on the number of ‘qualifying days’ (QDs) they work each week. Employers can use the SSP calculator to work out the employee’s sick pay, or use the rates below.

Unrounded daily rates Number of QDs in week 1 day to pay 2 days to pay 3 days to pay 4 days to pay 5 days to pay 6 days to pay 7 days to pay
£12.7642 7 £12.77 £25.53 £38.30 £51.06 £63.83 £76.59 £89.35
£14.8916 6 £14.90 £29.79 £44.68 £59.57 £74.46 £89.35
£17.8700 5 £17.87 £35.74 £53.61 £71.48 £89.35
£22.3375 4 £22.34 £44.68 £67.02 £89.35
£29.7833 3 £29.79 £59.57 £89.35
£44.6750 2 £44.68 £89.35
£89.3500 1 £89.35

Student Loan Recovery

If your employees’ earnings are above the earnings threshold, record their student loan deductions in your payroll software. It will automatically calculate and deduct repayments from their pay:

Rate or threshold 2017 to 2018 rate
Employee earnings threshold for Plan 1 £17,775 per year | £1,481 per month | £341 per week
Employee earnings threshold for Plan 2 £21,000 per year | £1,750 per month | £403 per week
Student loan deductions 9%

Company Cars: Advisory Fuel Rates (AFRs)

If you provide company cars to your employees then you can use AFRs to work out the mileage costs:

Engine size Petrol – amount per mile LPG – amount per mile
1400cc or less 11 pence 7 pence
1401cc to 2000cc 14 pence 9 pence
Over 2000cc 21 pence 13 pence
Engine size Diesel – amount per mile
1600cc or less 9 pence
1601cc to 2000cc 11 pence
Over 2000cc 13 pence

Employee Vehicles: Mileage Allowance Payments (MAPs)

MAPs are what you pay your employees for using their own vehicle for business journeys. You can pay your employees an ‘approved amount’ of MAPs each year without having to report them to HMRC. To work out the ‘approved amount’, multiply your employee’s business travel miles for the year by the rate per mile for their vehicle:

Type of vehicle Rate per business mile 2017 to 2018
Car For tax purposes: 45 pence for the first 10,000 business miles in a tax year, then 25 pence for each subsequent mile. For National Insurance purposes: 45 pence for all business miles
Motorcycle 24 pence for both tax and National Insurance purposes and for all business miles.
Cycle 20 pence for both tax and National Insurance purposes and for all business miles.