We look at the key tax changes that will apply from 6 April 2019
and what the financial impact may be for you.
Personal
allowance
From 6 April the personal allowance – the amount you can earn
before paying income tax – rises to £12,500 from £11,850. For most people this equates
to a reduction in tax of £130 a year.
The higher rate of income tax (40%) will increase to £50,000 from
£46,350. This is set to remain for the 2020/21 tax year.
National insurance changes
National insurance
contribution (NIC) limits will also change in keeping with the change in the
income tax threshold.
As a result, higher
earners will lose half their tax gains as a result of the personal tax
allowance rise.
People earning more than
£46,350 currently pay 12% NICs on earnings up to that level but only 2% on
higher amounts. However, from 6 April, they will pay the full 12% rate of NICs
on everything up to £50,000 as the upper earnings limit is increased.
This means that whilst
tax payable on that part will be reduced by 20%, NICs will go up by 10%, so the
net gain is only 10%.
Personal
pension changes
The tax-free amount you can pay
into a personal pension will stay the same (£40,000 per tax year). The lifetime
allowance for pension savings is set to increase from £1,030,000 to £1,055,000.
Auto-enrolment
As of 6th April, the
minimum amount you’ll need to pay into your employee’s workplace pension
increases from 2% to 3% and the overall contribution – the total amount of
employer and employee contributions – must be a minimum of 8% of your
employee’s earnings.
Dividend tax
The allowance for tax-free
dividends doesn’t change for the 2019/20 tax year at £2,000 and there’s no
change for dividend tax.
Any dividends received above this
allowance are taxed at the rates shown below, unless your shares are held in
a stocks & shares ISA (where
dividends are always tax-free):
|
Basic rate
|
7.5%
|
|
Higher rate
|
32.5%
|
|
Additional rate
|
38.1%
|
Inheritance tax on property
Inheritance tax is currently payable when the assets of an estate
amount to more than £325,000, this is known as the nil-rate band. Any assets
above this amount are subject to a tax of 40%.
The new tax year will not see any changes to these amounts.
However, the property
nil-rate band will increase from £125,000 to £150,000 per person when they
leave their home to a direct descendant, whether it be their child, grandchild,
adopted, or stepchild. This means that in the coming tax year, your inheritance
tax threshold will be £475,000 (£325,000 plus £150,000) if you leave your property
to your descendants.
On properties worth over
£2 million, homeowners will lose the allowance by £1 for every £2 they are over
the limit.
Get in touch
If you’d like to discuss how these developments might relate to your situation, call us on 01761 241 861 or email us today. We will be pleased to speak by phone or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.
