The 2019/20 tax year is approaching so it is important to be aware of the updated tax rates and thresholds, which will come into effect from 6th April 2019.
We have highlighted some of the rates and thresholds for the new tax year below that may impact you.
Personal Allowance
The Personal Allowance is the amount of tax-free income that you as an individual can have each tax year. For 2019/20, this will be £12,500.
Your Personal Allowance is reduced if your income exceeds £100,000 in the tax year. It is reduced by £1 for every £2 that your income is over £100,000. Therefore, your Personal Allowance would be zero if your income in the 2019/20 tax year is £125,000 and over.
Marriage Allowance
The Marriage Allowance allows couples to transfer a proportion of their personal allowance between them. This allowance for the 2019/20 tax year is £1,250.
To be eligible, you must be married or in a civil partnership. The lowest earner of the couple needs to be a non-taxpayer, so this would normally mean having income under the £12,500 personal allowance. The other partner needs to be a basic rate taxpayer and therefore have earnings between £12,500 and £50,000.
With the £1,250 being transferred, this could save you up to £250 (20% of £1,250) in income tax.
Income Tax Rates
Anything you earn above your personal allowance will be subject to income tax. If you live in England, Wales or Northern Ireland, there are three income tax bands.
| Basic Tax Rate: | 20% on earnings between the £12,500 Personal Allowance and £50,000 |
| Higher Tax Rate | 40% on earnings between £50,000 and £150,000 |
| Additional Tax Rate: | 45% on earnings above £150,000 |
If you live in Scotland, there is a different tax regime with five income tax bands.
| Starter Tax Rate: | 19% on earnings between £12,500 and £14,549 |
| Basic Tax Rate: | 20% on earnings between £14,549 and £24,944 |
| Intermediate Tax Rate: | 21% on earnings between £24,944 and £43,430 |
| Higher Tax Rate: | 41% on earnings between £43,430 and £150,000 |
| Top Tax Rate: | 46% on earnings above £150,000 |
Dividend Tax
There is a tax-free dividend allowance for the 2019/20 tax year of £2,000, which has not changed from 2018/19.
Once your dividends exceed the £2,000 tax-free allowance, the tax you pay will depend on which income tax band you’re in.
| Basic Rate | 7.5% |
| Higher Rate | 32.5% |
| Additional Rate: | 38.1% |
To work out what tax band you fall into, you should add your income from dividends to your other taxable income in the tax year. You may pay tax on your dividends at more than one rate.
For Scottish taxpayers, it is important to point out that with income from dividends and savings, the standard UK tax bands apply.
Tax on Savings
You will have a Personal Savings Allowance for the 2019/20 tax year and the amount of this will depend on which tax band you’re in.
| Income Tax Band | Tax-free savings income |
| Basic Rate: | £1,000 |
| Higher Rate: | £500 |
| Additional Rate: | £0 |
You may also get up to £5,000 of tax-free interest, which is your starting rate for savings. This would only apply if your other income is less than £17,500.
Capital Gains Tax
You may have to pay Capital Gains Tax if you sell (or dispose of) something that has increased in value. It is the profit that is taxed, not the amount that you receive for the asset
The rates for the 2019/20 tax year are as follows:
| Annual Exemption: | £12,000 |
| Basic Rate: | 10% (18% if the gains are from residential property) |
| Higher Rate: | 20% (28% if the gains are from residential property) |
If you dispose of a trading business, you may qualify for Entrepreneurs Relief. If you do qualify for the relief, the Capital Gains Tax on these gains would be 10%.
Capital Gains Tax can be a complex area so if you need help with this, we would advise contacting your accountant.
National Insurance
There are different thresholds and rates of National Insurance and these are summarised below for the 2019/20 tax year.
|
National Insurance Thresholds |
|
| Lower Earnings Limit | £118 per week (£6,136 per year) |
| Primary Threshold | £166 per week (£8,632 per year) |
| Secondary Threshold | £166 per week (£8,632 per year) |
| Upper Learnings Limit | £962 per week (£50,000 per year) |
|
National Insurance Rates |
|
| Employees (Class 1) | 12% on earnings between Primary Threshold and Upper Earnings Limit and then 2% on earnings above the Upper Earnings Limit |
| Employer (Class 1) | 13.8% on earnings above the Secondary Threshold |
| Employer (Class 1A) | 13.8% on any employer provided benefits-in-kind |
| Self-Employed (Class 2) | Usually £3.00 per week (with a small earnings exception of £6,365 for the year) |
| Self-Employed (Class 4) | 9% on profits between £8,632 and £50,000 and then 2% on profits above £50,000 |
Child Benefit Tax Charge
If you or your partner receive Child Benefit and either of you have individual income over £50,000, you will have to pay the Child Benefit Tax Charge.
The charge is 1% of the child benefit received for every £100 of income between £50,000 and £60,000. Therefore, if your income was £60,000 or over, the tax charge equals the amount of child benefit received.
Student Loan Repayments
The amount of student loan you repay will depend which repayment plan you’re on. Each plan has a different threshold for the 2019/20 tax year.
| Repayment Plan | Earnings Thresholds | Rate |
| Plan 1 | £18,935 per year (£1,577 per month / £364 per week) | 9% |
| Plan 2 | £25,725 per year (£2,143 per month / £494 per week) | 9% |
| Postgraduate Loan | £21,000 per year | 6% |
The rate of student loan repayments is only charged on income in excess of the threshold.
If you’d like to speak to an accountant about any of the above, then please do not hesitate to get in contact.
