4 min Read
12 Apr 2019

Written by Andy

New tax year changes for 2019 – how will they affect me?

New Tax Year Changes for 2019

How will the new tax year changes 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.

Income Tax 2018 2019 Increase Saving
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)

Student Loans  

The earnings threshold for repayment of student loans has been increased. Summarised below.

Student loans 2018 2019
Plan 1 loans £18,330 £18,935
Plan 2 loans £25,000 £25,725

Inheritance Tax

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%.

Auto-enrolment

The minimum amount that you need to pay into your workplace's auto-enrolment pension has increased and we have summarised the increase below.

Auto-enrolment 2018 2019
Employee minimum 3% 5%
Employer contribution 2% 3%
Total contribution 5% 8%

Dividend Tax Rates

No change. See our table below.

Dividends 2019
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%

Corporation Tax

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

 

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