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2019-20 tax year changes

A whole host of changes will take place in the 2018 - 2019 tax year from 6 April, affecting everything from National Minimum Wage to pensions. See some of the key updates here:

New National Minimum Wage Rates

The new National Minimum Wage for 2019 - 2020 is as follows: 

NMW rates from April 2019 

25+ £8.21    21-24 £7.70    18-20 £6.15    Under 18 £4.35  Apprentice £3.90

2019 - 2019 NMW Rates

25+ £7.83  21-24 £7.38  18-20 £5.90  Under18 £4.20  Apprentice £3.70

Less income tax

The personal allowance – which is the amount that can be earned tax-free – is due to rise from £11,850 to £12,500 in 2019-20 which means employees will pay tax on less of their income.

The higher-rate threshold is also rising, up to £50,000, so that more can be arned before the 40% tax rate kicks in.

National insurance is going down (for some)

The thresholds at which National Insurance is paid are also rising. Earnings below £8,632 won’t incur any National Insurance costs at all. Last year, this threshold was £8,424, meaning most will see a slightly smaller bill.

Between £8,632 and £50,000, National Insurance is paid at 12%. Above £50,000, it's 2%.

This upper threshold is substantially higher than last year, when it was £46,350. Those earning more than this amount might see bills creep up, as more of the income is taxed at 12% rather than 2%.

Your pension pot will grow

On 6 April, the amount that employees and their employer pay into a workplace pension through auto-enrolment increased from 3% to 5%. Employer’s contribution also went up, from 2% to 3%.

In the short-term, this means employees may see their monthly earnings fall slightly, but over the long-term there will be significatnt returns from higher contributions that will help offer financial support in retirement.

State pension is rising

The state pension increased by £221 a year.

ISA allowances are refreshed

The £20,000 ISA limit is refreshed, meaning savers can put away up to £20,000 in a cash ISA or split it up. For example, taking an investment risk with a stocks and shares ISA, or innovative finance ISA.

Inheritance tax bills may be cut

When a home is left to a direct descendant, such as a child or grandchild, there will now be an additional tax-free allowance. This is now £150,000, up from £125,000 last year. This is layered on top of the standard tax-free allowance of £325,000, meaning up to £475,000 could potentially be left behind without paying tax.

Married couples and civil partners can inherit from one another tax-free and apply one another’s allowances to their estates. So, a couple theoretically could pass on up to £950,000 tax-free.

Changes for the self-employed

Those who are self employed are likely to see the amount of National Insurance they pay climb slightly, depending on how much they earn. It will be possible to earn £6,365 without paying any NI, up from £6,205 last year. And Class 4 rates won't need to be paid until earnings reach £8,632, up from £8,424.

However, between £6,365 and £8,632, there will be a higher amount to pay – £3 a week instead of £2.95.

Making Tax Digital for VAT

If a business needs to pay VAT (profits top £85,000) they will also have to start reporting your tax more regularly. This initiative, known as Making Tax Digital, will apply to more than 1.4m businesses UK-wide.

If you or your business need help adapting to MTD please get in touch with our team who will be happy to offer advice and guide you through the process.