16 Apr
Everything you need to know about the 2019-20 tax year

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We’re into the new tax year, so whether you’re employed or self-employed, there’s likely to be some impact on your finances. Let’s see what’s changed tax-wise from 6 April 2019 onwards.

Going down! You’ll be paying less income tax*

That’s right! Your personal allowance (how much you can earn before paying income tax) increases on 6 April, from £11,850 to £12,500. This'll lead to a reduction in tax for basic-rate taxpayers (in other words, most of us) to the tune of £130 a year. Success!

If you pay the higher rate of income tax (40%), the threshold will increase from £46,350 to £50,000, including the increased personal allowance.

*Although it’s a bit different in Scotland

Things have changed a bit if you’re paying income tax in Scotland. The Scottish Budget in December 2018 introduced the following tax bands and thresholds:

Band name

Earnings

Tax rate

Starter rate

Over £12,500 to £14,549

19%

Basic rate

Over £14,549 to £24,944

20%

Intermediate rate

Over £24,944 to £43,430

21%

Higher rate

Over £43,430 to £150,000

40%

Additional rate (top rate)

Above £150,000

46%

 

Note that the personal allowance is reduced by £1 for every £2 earned over £100,000 - the same as the rest of the UK.

Up, up and away! National Insurance thresholds are rising

The thresholds at which National Insurance (NI) is paid are rising which will marginally benefit most earnings, but less so those on higher earnings.

For this tax year, no NI is paid below earnings of up to £8,632 - an increase on last year’s threshold of £8,424. So for now, NI is paid at 12% on earnings between £8,632 and £50,000.

Earnings above £50,000 see a 2% NI payment, which has increased from the £46,350 threshold of last year. This means the £3,650 difference will require NI to be paid at 12%, as opposed to 2%. So if you’re within that bracket, you can expect a larger NI bill this year - best to get ahead and prepare your finances now by getting in touch with an accountant!

Going up! Workplace pension pots are growing

Auto-enrolment minimum contributions into the workplace pension are going up from 6 April. The staff minimum contribution has gone up from 3% to 5%, and employer minimum contribution has increased from 2% to 3%. This means the total minimum contribution is now 8%. It’s never too early to start saving for your pension, so we like to think of this as a good thing!

Although monthly pay packets for those paying the minimum amount will see a bit of a hit, this’ll hopefully be worth it in the long run, as pension pots will bloat. Even if you were already contributing 5% to your pot, your employer contribution will go up, and your pay packet will remain unaffected - sounds ideal to us!

Capital gains tax may be cheaper

The tax-free allowance on capital gains tax (tax you pay on the profit you make on selling something that’s increased in value) has increased from £11,700 to £12,000. So hopefully selling a good investment on will be a little bit more profitable!

Going down! Inheritance tax going down

If you're inheriting property in the 2019/20 tax year, you could be in luck! It's likely that we will be seeing smaller inheritance tax bills from 6 April.

If you leave your home to a direct descendant, you get an additional tax-free allowance. This goes up from £125,000 to £150,000 in the new tax year. There's also a standard tax-free allowance of £325,000, meaning you could leave up to £475,000 without tax being payable.

It's possible for married couples and civil partners to inherit from one another tax-free, and also apply each other’s allowances to their estates. As such, it's possible to pass on a maximum of £950,000 without paying tax. This could benefit more couples in future too, since civil partnerships are now available to mixed-sex couples.

ISAs staying the same, but with a little refresh

Savers can stash up to £20,000 a year in an ISA (either a cash ISA, or a stocks and shares ISA), and this remains the same for the coming tax year. But on 6 April this refreshes, so you can start over.

Does tax leave you scratching your head?

Getting an easy-to-use accountancy service on-side could ultimately save you bundles of time and money. And, as luck would have it, that’s exactly what we’re here for! To find out how Mazuma can help you with any of your tax concerns, feel free to contact us with no obligation.

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