Happy New Tax Year!

Monday, April 1, 2019

As we usher in a brand-new tax year. This is an opportunity to review, reconsider and revise.

As we usher in a brand-new tax year. This is an opportunity to review, reconsider and revise. There will also be a raft of new changes to get up to speed with, if you are not already, and to alert clients about. There are no massive shifts in legislation, however, the 2019-2020 tax year brings with it some adjustments, including to personal allowances, benefits in kind and CGT, amongst others. Below is an overview of what to expect from April onwards:

 

Happy birthday ISAs!

This year marks a big milestone for the savings vehicle; on 6th April this tax-efficient way to save and invest funds will be 20 years old. The security and flexibility of ISAs has made them enduringly popular and around four out of 10 adults have money in ISAs, worth around £608 billion.

 

Personal allowance

The rate of Personal Allowance rises on 6th April to £12,500 (from £11,850). It prompts a minor reduction in tax of £130 a year for most. The threshold for paying the Higher Rate of income tax will go up to £50,000 (from £46,350).

 

Scottish changes

The personal allowance threshold of £12,500 remains the same in Scotland, but after that the first £2,049 of earnings are taxed at 19%. Then it moves to 20% tax until earnings hit £24,944, where it rises to 21%. After £43,431 the rate is 41% and over £150,000 it is 46%.

 

Dividends

The dividend tax remains at £2,000. No tax is payable if there is any unused personal allowance that covers any additional dividend. Any dividends in the basic rate tax band (up to £50,000) will be taxed at 7.5%. Dividends in excess of the basic rate tax band will be taxed at 32.5%. Any dividends falling within the additional rate band will be taxed at 38.1%.

 

Company cars

Benefit in kind (BiK) tax rates are increasing for company cars and the percentage applied will depend upon the CO2 emissions published by the Vehicle Certification Agency. HMRC has published advice to calculate company car tax.

 

Company vans and fuel

When employers pay for fuel that has been used personally or permits personal use of a company van, it counts as a BiK. The tax on these benefits is rising on 6th April, with the BiK on company vans increasing to £3,430 (from £3,350) and the BiK on fuel for a van provided for personal use going up to £655 (from £633). Those supplied with both a company car and fuel from the employer is taxed on the cash equivalent value of the benefit. The cash equivalent amount rises this year to £24,100 (from £23,400). The BiK charge is calculated by using a percentage, the same as the rate for company car benefit purposes and then multiplying by the fixed amount.

 

Capital gains tax

The Capital Gains Tax annual exemption level for individuals increases to £12,000 (from £11,700). Added to which, Entrepreneurs’ Relief qualifying conditions period will be extended from 12 months to 24 months.

 

Personal Pensions

There is no movement on the tax-free amount you can pay into a personal pension, which stays put at £40,000 per tax year. However, the lifetime allowance for pension savings increases from to £1,055,000 (from £1,030,000).

 

Auto-enrolment

The phased increase in auto-enrolment pension contributions rises again in April. The total amount of employer and employee contributions must be a minimum of 8% of the employee’s qualifying earnings.

 

National insurance

There have been no changes to the percentage of National Insurance Class 1 contributions, they remain at 12% on earnings between £8,632 and £50,000, and 2% is payable on any earnings above £50,000. The limits and thresholds have changed though.

 

Minimum wage and Living Wage

The amounts increase from 1st April 2019. The minimum hourly rate that staff are entitled to depends on their age and whether they are an apprentice. Those 25yrs and older will receive £8.21 per hour.

 

Student loan threshold increase

It has been confirmed that the earnings threshold will rise, to qualify for making student loan repayments. Plan 1 loan will rise to £18,935 (from £18,330) and Plan 2 loans will rise to £25,725 (from £25,000).

 

Annual investment allowance

There is a temporary increase the AIA limit to £1,000,000 from 1st January 2019 for two years. companies will be able to claim £1million as AIA for expenditure incurred on fixed assets such as plant and machinery. The intention is to provide significantly faster tax relief for these types of investments, helping businesses to invest and grow.

 

Business rates

Business rates for companies with a rateable value of £51,000 or less will be reduced. The Government announced that it will provide a business rates Retail Discount scheme for occupied retail properties with a value of less than £51,000 in the 2019-20 and 2020-21 tax years.