The 2019/20 tax year commences on 6th April 2019. We’ve put this article together to highlight the main changes affecting individuals and businesses.
We’ve got a separate article that contains all the tax rates, thresholds and allowances for 2019/2020 (and 2018/2019).
Personal Tax, thresholds and allowances
The Personal Allowance – the amount you can earn before paying Income Tax – increases on 6th April 2019 to £12,500 (from £11,850). This will lead to a small reduction in tax of £130 a year for most people. The threshold for paying the Higher Rate of income tax (which is 40%) will increase to £50,000 (from £46,350). This amount includes the increased Personal Allowance.
To maximise your tax efficiency as a company Director and Shareholder, your company should pay you a salary of £8,632 and dividends of up to £41,368 in the 2019/20 tax year. This assumes that you have no other income. Your total personal tax bill would then be £2,662.50. If you take more than this in dividends and salary then you will start to pay tax on the dividends at 32.5%. Our Crunch Personal Tax Estimator can help you get a more personalised calculation.
If you have any questions about how these amounts have been calculated, or you’d like your limited company to pay you more, then you should speak to an accountant for tailored advice. If you don’t have an accountant or are looking to switch, give our friendly team a call on 0333 311 8000 or arrange a free consultation.
Scottish Income Tax
The Scottish Budget announcement in December 2018 introduced a range of changes for the 2019/20 tax year including the following new bands and thresholds.
||2018/19 tax year
||2019/20 tax year
|| Bands and Thresholds
||£11,850 – £13,850
||£12,500* – £14,549
||£13,851 – £24,000
||£14,550 – £24,944
||£24,001 – £44,273
||£24,945 – £43,430
||£44,274 – £150,000
||£43,431 – £150,000
The above table assumes the individual is receiving the Personal Allowance for tax-free income of £12,500 for the 2019/20 tax year (£11,850 in 2018/19). The Personal Allowance is reduced by £1 for every £2 earned over £100,000. This is the same as the rest of the UK.
The Dividend Allowance for the 2019/20 tax year remains at £2,000. However, as outlined above the increased tax thresholds mean that you can take more in dividends before paying the higher dividend tax rate.
National Minimum Wage and National Living Wage
Whilst not strictly a tax year change, National Minimum Wage and ‘National Living Wage’ amounts increase from 1st April 2019. The minimum hourly rate that your staff are entitled to depends on their age and whether they are an apprentice.
||25 years +
||21 to 24 years
||18 to 20 years
||Under 18 years
|1st April 2019
Back to top
Company Cars, Vans and Fuel Benefit
From 6th April 2019, benefit in kind (BiK) tax rates are increasing for company cars. The percentage applied to the list price of the car will increase based on the CO2 emissions published by the Vehicle Certification Agency. HMRC has published a ready reckoner you can use to calculate your company car tax.
Company vans and fuel benefit for company cars
When your company pays for fuel you have used personally or allows personal use of a company van, it is a BiK. These fuel benefit charges only apply if fuel is provided for personal use.
The tax paid on such benefits is being increased from 6th April 2019. The BiK is a fixed amount for vans and the changes are as follows for directors and employees:
- The BiK on company vans increases to £3,430 (from £3,350)
- The BiK on fuel for a van provided for personal use increases to £655 (from £633).
The fuel benefit calculation for cars is a little more complex.
A director/employee who is provided with a company car and also receives free fuel from his employer is taxed on the cash equivalent value of the benefit each tax year. The cash equivalent amount is fixed each year and increased to £24,100 (from £23,400) on 6th April 2019.
The BiK charge is calculated by using an appropriate percentage, which is the same as the rate for company car benefit purposes (see above) and then multiplying by the fixed amount (£24,100 in 2019/20). So if the BiK percentage for your company car is 13%, your BiK amount on the fuel provided for personal use is £3,133 (13% of £24,100).
Back to top
Student Loan Plan 1 and Plan 2 threshold increase
The Department for Education has confirmed that from 6th April 2019 the earnings threshold before you start to repay a student loan for:
- Plan 1 loans will rise to £18,935 (from £18,330)
- Plan 2 loans will rise to £25,725 (from £25,000).
If you’re a director being paid salary and dividends from your company, and you’re paying back a student loan, you must remember the threshold for repayment is based on your total income.
This will apply to all current and future student loans where employers make student loan deductions. So if you run a payroll for any employees who have student loan deductions, you need to ensure you have a record of what type of loan they have, so that the correct deductions are made.
We’ve also written a more detailed article on Student Loan repayments.
Postgraduate Master’s Loan and Postgraduate Doctoral Loan (New)
A Postgraduate Master’s Loan is a new type of loan introduced by the government to help with course fees and living costs while you study a postgraduate master’s course. The repayment of your Postgraduate Loan is treated the same as any other Student Loan and Interest is charged from the day you get the first payment.
Repayment will be at 6% for students in England & Wales on income above £21,000 but at 9% for Scottish and Northern Ireland students with income above £18,330.
Back to top
Other personal tax reliefs and allowances
The tax-free amount you can pay into a personal pension remains at £40,000 per tax year. The lifetime allowance for pension savings increases from 6th April 2019 to £1,055,000 (from £1,030,000)
Capital Gains Tax
The Capital Gains Tax annual exempt amount for individuals increases to £12,000 (from £11,700).
From 6th April 2019, the minimum period throughout which the qualifying conditions for Entrepreneurs’ Relief must be met will be extended from 12-months to 24-months.
Back to top
Corporation tax, workplace pensions and allowances
Corporation Tax payable on business profits remains at 19%. The government is planning to reduce this to 17% for the 2020/21 tax year (on 6th April 2020).
Workplace pensions (auto-enrolment)
The minimum amount you need to pay into your employee’s auto-enrolment workplace pension increases from 6th April 2019. This means the total amount of employer and employee contributions must be a minimum of 8% of your employee’s qualifying earnings.
||Total minimum contribution
||Employer minimum contribution
||Staff contribute the remainder
||Up to 3%
|6th April 2019
||Up to 5%
Annual Investment Allowance (AIA)
Companies will be able to claim £1 million as AIA for expenditure incurred between 1st January 2019 and 31st December 2020 on fixed assets such as plant and machinery.
Business rates for companies with a rateable value of £51,000 or less will be reduced by a third between 6th April 2019 and 31st March 2021.
With the New Tax almost upon us, why not think about ways you could be more efficient. Our article New Tax Year You has some great ideas.