The new tax year is upon us, and that means a change to the UK’s tax brackets for 2019/20. New rates and allowances will come into place for both individuals and business owners, and if you’re a business owner, many of these shifts will affect you and your finances.
Let’s take a look in a little more detail.
What can you expect?
Some of the main changes that stand out for personal income tax rates are a higher tax-free personal allowance threshold, which will rise to £12,500, with no further changes set to increase with inflation until 2021/22. The table below illustrates the upcoming changes in your personal allowance.
| Tax Band | 2018/19 Taxable Income | 2019/20 Taxable Income | Tax Rate |
| Personal Allowance | Up to £11,850 | Up to £12,500 | 0% |
| Basic Rate | £11,851 to £46,350 | £12,501 to £50,000 | 20% |
| Higher Rate | £46,351 to £150,000 | £50,001 to £150,000 | 40% |
| Additional Rate | Over £150,000 | Over £150,000 | 45% |
So, what does this mean for you? It means you’ll get an additional £650 tax-free, and if you pay the basic rate of tax, you’ll have an extra £3,650 a year before you move to the higher rate, saving you another £600 in tax! There’s no movement at the moment on the additional rate, and you should keep in mind that you don’t receive any personal allowance when you earn over £125,000 in 2019/20.
Subsequently with the tax brackets changing, so too will the National Insurance thresholds. At the 12% rate, the threshold will increase from £8,424 – £46,384 to £8,632 – £50,000, and the 2% rate will apply to those earning over £50,000, rather than last year’s £46,384.
For employers, Class 1 NICs will be payable at 13.8% on earnings above £166 per week (or £8,632 annually), and for employees, Class 1 NICs will be payable at 12% on salaries received between £166 and £962 per week (£8,632 – £50,024 annually). Anything above this will be taxed at 2%.
The annual increase to the national minimum wage will also come into effect from the 1st April 2019:
| Year | 25 and over | 21 to 24 | 18 to 20 | Under 18 | Apprentice |
| April 2018 (current rate) | £7.83 | £7.38 | £5.90 | £4.20 | £3.70 |
| April 2019 | £8.21 | £7.70 | £6.15 | £4.35 | £3.90 |
For the self-employed there are more changes:
Although there will be a small increase in the weekly amount of class 2 National Insurance payments, this will only equate to an additional £2.60 per year. The average person will still be saving a small amount (£24.96) on the increase to the Class 4 band.
| Type | 2018/19 Rate | 2019/20 Rate |
| Class 2 | £2.95 per week | £3 per week |
| Class 4 | 9% on profits between £8,424 to £46,350 | 9% on profits between £8,632 to £50,000 |
| Class 4 | 2% on profits over £46,350 | 2% on profits over £50,000 |
Dividend taxes:
There won’t be any changes in the Dividend taxes this year, although they will benefit from the rise in the personal tax bands. Anyone with dividend income will still receive £2,000 tax-free, no matter what non-dividend income they have. You receive this on top of your standard personal allowance.
The following tax rates and thresholds will apply after the personal allowance of £12,500 is used:
| 2019/20 | Dividend Tax rate | From | To |
| Basic Rate | 7.5% | £2,000 | £37,500 |
| Higher Rate | 32.5% | £37,501 | £150,000 |
| Additional Rate | 38.1% | £150,000 + |
Any Questions?
If you’re unsure how the changes in rates and allowances will impact you, or you’d like to discuss tax planning to help minimise your liabilities, get in touch with us today. Our team of friendly tax experts are ready to help!
