As 2019/20 tax year covering the period 6 April 2019 to 5 April 2020 has now begun there are changes which came into effect from a personal tax perspective. In a series of blogs we will be providing a summary of some of the changes, starting with the personal allowance and marriage allowance.

Personal Allowance

The personal allowance has increased to £12,500, an increase of £650 from the 2018/19 tax year (£11,850). This means the first £12,500 of income is tax free and for those basic rate taxpayers this will lead to a reduction in tax of £130.

Where an individual has what is known as “adjusted net income” totalling over £100,000, the personal allowance is reduced by £1 in every £2. So there will be no entitlement to the personal allowance when adjusted net income exceeds £125,000.

Marriage Allowance

It is possible for some couples where one spouse or civil partner’s income is below the personal allowance to transfer 10% of their personal allowance to their spouse or civil partner. This is only possible if the other spouse or civil partner’s income is taxed at the basic rate.

Income Tax Rate Bands

The basic rate band has been increased to £37,500 (£34,500 in 2018/19) and this means individuals will not pay the higher rate of tax (40%) unless their income exceeds £50,000 (£46,350 in 2018/19). This is for individuals who are entitled to the personal allowance in full.

The 2019/20 tax rate bands are:

Taxable Income (after deducting the personal allowance) General Rate Dividend Rate
£1 to £37,500 20% 7.5%
£37,501 to £150,000 40% 32.5%
Over £150,00 45% 38.1%

 

With the changes to the personal allowance and rate bands, higher rate taxpayers will find themselves £860 better off over the course of the tax year. Additional rate taxpayers will see that they are £600 better off over the course of the tax year.

Scottish Taxpayers

There are five Scottish income tax rates which apply to Scottish taxpayers for income such as employment, self-employment and rental income. The rates range between 19% and 46%. Scottish taxpayers are entitled to the personal allowance and it is reduced when total adjusted net income is above £100,000.

The 2019/20 Scottish tax rate bands are:

Taxable Income Rate %
£1 – £2,049 Starter 19%
£2,050 – £12,444 Basic 20%
£12,445 – £30,930 Intermediate 21%
£30,931 – £150,000 Higher 41%
Over £150,000 Top 46%

 

For income from savings and dividends the rates are the same as the rest of the UK.

Welsh Taxpayers

With effect from April 2019, the Welsh Government has the right to change the rates of income tax payable by Welsh taxpayers. The UK Government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10p. The Welsh Government has increased the three rates of income tax by 10p. This means Welsh taxpayers pay the same rates of income tax as taxpayers in England and Northern Ireland.

Student Loans

The Department for Education has confirmed that from 6 April 2019, the Plan 1 threshold increases to £18,935 (£18,330 in 2018/19) and the Plan 2 threshold to £25,725 (£25,000 in 2018/19). The rate of deduction for both plans remains at 9%.

If you are an employee your employer will deduct the student loan repayment from your employment income.

If you are self-employed then student loan repayments will be made via the self-assessment system through the completion of a tax return.

Postgraduate Master’s Loan and Postgraduate Doctoral Loan

A Postgraduate Master’s Loan is a new loan introduced by the government to help individuals with course fees and living costs whilst studying the postgraduate master’s course. The repayment of this type of loan is treated exactly the same as any other Student Loan and interest is charged from the day you first get the loan.

The repayment of the loan begins when threshold income is above £21,000 for students in England and Wales and the rate of deduction is 6%. The rate is set at 9% for students in Scotland and Northern Ireland with income above £18,330.

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Author: Anthony Barron, Tax Manager, Plus Accounting

Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site.