Now we have entered the new tax year on the 6 April 2019, here are the new changes that individuals need to be aware of for the 2019/2020 tax year.
Income
Personal Allowance
The Personal Allowance has increased from £11,850 to £12,500. This means most people will get a £130 tax reduction compared to 2018/19. The Higher Rate of income tax (40%) will now kick in on earnings over £50,000 instead of £46,350 as in 2018/19.
Personal Savings Allowance & Dividend Allowance
The personal savings allowance (PSA) and dividend allowance have remained the same as 2018/19. The PSA remains at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers, the amount of dividend income taxed at 0%, remains at £2,000.
National Minimum and Living Wage
The increase in the National Minimum Wage and National Living Wage increased from the 1st April 2019. The hourly rates that must be applied are: –
| Year | 25 years + | 21 to 24 years | 18 to 20 years | Under 18 years | Apprentice |
| Pre 1st April 2019 | £7.83 | £7.38 | £5.90 | £4.20 | £3.70 |
| 1st April 2019 | £8.21 | £7.70 | £6.15 | £4.35 | £3.90 |
Company Vehicle Benefits
Benefits in kind tax rates are increasing for company cars provided to employees. As with previous year the percentage applied to the list price of company cars will be based on their CO2 emissions. The benefit in kind can be calculated using this HMRC link Car Benefit Calculator.
The same CO2 percentage is applied a fixed amount where fuel has been provided for the employee’s personal use. The CO2 percentage is multiplied by £24,100 to give the benefit in kind chargeable, an increase from £23,400 from 2018/19.
Where a company van and/or fuel has been provided for personal use a benefit in kind charge will be applied. The benefit in kind for van is a fixed amount as found below:
- Company vans provided for private use will be £3,430 (increase from £3,350).
- Fuel also provided with a van an additional £655 will be chargeable (increase from £633).
National Insurance Contributions
The new threshold for Class 1 NIC will be £8,632, amounts in excess of this threshold will be charged at 12% up to £50,000. Individuals will pay 2% NIC on earnings over £50,000.
Self-employed individuals will be subject to NIC of £3 per week on earnings over £6,365pa with an additional 9% on earnings between £8,632 and £50,000pa. Earning over £50,000 will attract a 2% contribution plus the £3 per week.
Class 3 voluntary contributions can be made at £15 per week.
Capital Gains
Annual Exemption
The capital gains annual exemption has increased from £11,700 to £12,000.
Entrepreneurs’ Relief (ER)
A major change to ER is now in effect, the qualifying conditions must now be met for 24 months prior to any disposal instead of the previous 12 months period.
Savings
Personal Pensions
The annual allowance (the gross amount you can contribute to your pension each tax year) remains at £40,000. As with previous years this is reduced where your Threshold Income and Adjusted Net Income are above the £110,000 and £150,000 thresholds respectively. There is a minimum level of £10,000 that all individuals are entitled to.
The lifetime allowance increases from 6 April 2019 to £1,055,000 from £1,030,000.
ISAs
Once again, the limit on ISAs are £20,000 for the tax year. The limit can be spread across different types of ISAs with an aggregate of £20,000.
For those who are looking to looking to create a Help to Buy ISA, they must do so before December when the initiative will cease. Individuals can save £3,400 for the first year and £2,400 in future years.
Lifetime ISAs will still be available and can be used for buying a first home or retirement, a £4,000 limit per year is applied.
