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 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 |
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.
