The Budget 2018 will result in most people paying less tax on their income from April 2019, the result of the Personal Allowance and Higher Rate Thresholds being increased to their target levels a year early. The reduced income tax will be recuperated through national insurance contributions, the burden placed on higher earners after the upper rate limit was increased by around 10% from 2018/19.
1) Personal Allowance (PA) will rise to £12,500 from April 2019, a year earlier than expected. This means basic rate taxpayers will be £155 better off for the 2019/20 tax year.
The higher rate threshold will also rise to the target of £50,000 a year in advance, meaning that individuals who earn between £37,500 and £100,000 after PA will be around £566 better off.
Both are planned to remain the same in 2020-21 with the PA then increasing each year based on the Consumer Price Index.
2) ISA limits will remain at £20,000 for 2019/20 with the Junior ISA limit increasing slightly to £4,368.
3) Marriage Allowance will increase to £1,250 from £1,190. The marriage allowance enables individuals to transfer 10% of their PA to their Spouses or Civil Partners if both are basic rate tax payers.
4) The National Living Wage and National Minimum Wage will increase as follows.
- National Living Wage for workers aged over 25 up to £8.21 from £7.83.
- National Minimum Wage for workers aged 21-24 up to £7.70 from £7.38.
- National Minimum Wage for workers aged 18-20 up to £6.15 from £5.90.
- National Minimum Wage for workers aged 16-17 up to £4.35 from £4.20.
- National Minimum Wage for apprentices aged under 19 or in their first year of apprenticeship will rise to £3.90 from £3.70.
5) National Insurance thresholds have also been raised with the primary threshold rising to £8,632 from £8,424 and the upper earnings limit raising to £50,024 from £46,834.
Those near the upper earnings limit will potentially end up paying national insurance on an extra 10% of their earning compared to 2018/19.
6) Changes to IR35 will be implemented with the intermediaries’ rules being extended to the private sector as well as the public sector form April 2020. The engaging business, agency or third party which will need to determine whether a contract falls within the IR35 rules, and not the Personal Service Company.
7) Premium bond minimum purchase will be cut from £100 to £25 by the end of March 2019. Adults other than parents or grandparents will be able to purchase premium bonds for children under 16.
The maximum amount you can hold will remain at £50,000.
