Personal Tax changes for the new tax year starting 6th April 2019 (2019/20).  

Income tax

• The personal allowance is increased to £12,500.
• The basic rate limit is increased to £37,500 at 20%
• Add the above two and this means income over £50,000 is taxed at 40%
• Income over £150,000 remains taxable at 45%
• For income over £100,000 the personal allowance is reduced at the rate of £1 for every £2 of income, giving an effective tax rate of 60% for income in this band.

Capital gains tax (CGT)

• The exempt amount is £12,000.
• No changes to rates for:
  • 10% (basic rate taxpayers) & 20% (higher rate taxpayers).
  • Disposals of residential property or the carried interests of investment managers also remain at 18% and 28%

Corporation tax

• The corporation tax rate remains at 19% (proposed 17% from 2020) for most of the UK.

Savings

• No changes to the 0% savings tax band of £5,000 and a 0% personal savings allowance of £1,000 for basic rate payers and £500 for higher rate payers.
• A new lifetime ISA to help with retirement savings or buying a first home for the under 40s.
• The annual ISA limits remain at £20,000 (£4,368 for children)

Landlords

• Mortgage interest and finance costs for buy to let residential property is further restricted to 25%.  The balance of 75% is available only as a basic rate tax deduction.

Dividends

• Dividend allowance remains at £2,000.
• Dividend tax rates are unchanged at 7.5% (basic rate), 32.5% (higher rate) and 38.1% (upper rate).

Pensions

• The pension lifetime allowance is increased to £1,055,000.
• The pension annual allowance reduces by £1 for every £2 that an individual’s income (including pension contributions) exceeds £150,000, down to a minimum of £10,000 for individuals with income of £210,000 or more.
• Individuals with a net income, excluding pension contributions, of less than £110,000 will not be subject to the taper.
• The pension input period (PIP) is aligned with the tax year.

If you would like to discuss further, please contact Shakeel Butt. shakeel@wsm.co.uk  or  0208 545 7624