New tax year changes for 2019 – how will they affect me?
On the 6th April 2019 we moved into the new 2019/2020 tax year. Every year we see changes to thresholds and rates and this tax year is no different. In this article we summarise the changes and explain how they may affect you.
Income Tax Rates 2019/2020
The tax-free personal allowance has been increased from £11,850 to £12,500 and the higher-rate allowance has increased from £46,350 to £50,000. We have summarised the changes in the table below and show how the changes could affect you.
|Tax-free allowance||£11,850||£12,500||£650||£130 (If basic-rate tax payer)|
|Higher-rate allowance||£46,350||£50,000||£3,650||£860 (If higher-rate tax payer)|
The earnings threshold for repayment of student loans has been increased. Summarised below.
|Plan 1 loans||£18,330||£18,935|
|Plan 2 loans||£25,000||£25,725|
The tax-free threshold remains at £325,000, but the additional rate that applies to property passed directly to a descendant increases from £125,000 to £150,000.
|Inheritance Tax||2018||2019||Increase||Total (including tax-free threshold)|
|Threshold on property passed directly to descendants||£125,000||£150,000||£25,000||£475,000|
Don't forget: Passing on assets to a spouse is tax-free and that spouse can then make use of both allowances, meaning a married couple can increase their allowance to £950,000.
It has been confirmed that a further increase next year will bring the total tax-free allowance for a married couple up to £1 million.
Lifetime Allowance (Personal Pension)
The lifetime allowance on pension contributions has increased from £1.030 million to £1.055 million, an increase of £25,000. This is the total limit on the amount a retiree can amass in a pension without having to pay additional tax of up to 55%.
The minimum amount that you need to pay into your workplace's auto-enrolment pension has increased and we have summarised the increase below.
Dividend Tax Rates
No change. See our table below.
|The tax-free dividend allowance||£2,000|
|Basic-rate taxpayers % on dividends||7.50%|
|Higher-rate taxpayers % on dividends||32.50%|
|Additional-rate taxpayers % on dividends.||38.10%|
Capital Gains Tax 2019/2020
The annual exemption from capital gains has increased from £11,700 to £12,000. The percentages remain the same and can be found in our table below.
|Capital Gains Tax||2019|
|Annual exemption from capital gains||£12,000|
|As a basic rate taxpayer||18%|
|Gains from other chargeable assets||10%|
|As a higher rate taxpayer||28%|
|Gains from other chargeable assets||20%|
No change. Remains at 19%.
There is a small change to the entrepreneurs’ relief in that the qualifying conditions for which the relief must be met has been extended from 12-months to 24-months.
VAT Registration Threshold
No change. Remains at £85,000
Buy to let
In 2015, former chancellor George Osborne introduced a tax change that removed landlords' ability to deduct the cost of their mortgage interest from their rental income when calculating profits. The change was phased in from 2017, meaning that for this tax year, the amount that can be deducted is only 50%. This will reduce by 25% each year and so by 2021 landlords will no longer be able to deduct the cost of mortgage interest when working out their profits from buy to let properties.
|Buy to let||2018||2019||2020||2021|
|Mortgage interest deducted against rental income||75%||50%||25%||0%|
ISA Limits 2019/2020
The junior ISA limit has been increased from £4,260 to £4,368 and all other ISA limits remain the same. The limits for all ISA types are summarised below. If you are interested in finding out more about ISAs, then check out our article best and cheapest investment ISAs for beginners.
|Types of ISA||2018||2019||Difference|
|Cash ISA||£20,000||£20,000||No change|
|Stocks and Shares ISA||£20,000||£20,000||No change|
|Innovative finance ISA||£20,000||£20,000||No change|
|Help to buy ISA||Initial £1,200 plus £200 per month||Initial £1,200 plus £200 per month||No change|
|Lifetime ISA||£4,000||£4,000||No change|
|Junior ISA||£4,260||£4,368||Increase of £108|
Looking for a financial adviser near you?
Do you need financial advice? An independent financial adviser can show you how to make the most of your money.
Simply find your nearest qualified and regulated adviser using the UK’s largest adviser search.