Tax Rates and Allowances
Tax allowances for 2019/20
|Minimum Personal Allowance (on incomes under £100,000)||£12,500*|
|Married Couple's Allowance (MCA) (one of both born before 6th April 1935)||£8,915*|
|Blind persons allowance||£2,450*|
|Personal Savings Allowance Basic rate||£1,000|
|Personal Savings AllowanceHigher rate||£500|
*Note: Personal Allowance is restricted for those in total incomes over £100,000 by £1 for every £2 over this amount.
*Note: Married couple's allowance (MCA) is restricted to 10% of the value and reduces tax due, not tax-free income it is only available where one spouse is born before 6 April 1935. It is also withdrawn by £1 for every £2 of income if an income goes above the limit of £29,600 until it is reduced to the minimum level of £3,450.
*Note: Blind person's allowance can be claimed by those who are registered severely sight impaired (SSI) with a local authority. You do not have to be totally sightless to be registered blind. Any part of this allowance that is unused by the recipient can be transferred to their spouse or civil partner. If either spouses or civil partners are registered blind, they will both get the allowance but this allowance is not available to those who are registered as partially sighted.
Marriage Allowance – This allowance is available to married couples and civil partners where both parties are basic rate tax payers and one party wants to transfer 10% of their personal allowance (£12,500) to the other. This is usually where there is unused allowance available. It effectively reduces the recipient’s tax bill by up to £250 but can only reduce their tax bill to zero i.e. Not create a refund. If you claim the married couple’s allowance above you cannot claim this one.
Personal Savings Allowance (PSA)– This allowance works in conjunction with the starting rate for savings (see below) and means that the first £1,000 (basic rate tax payers) of your savings are not taxable (£500 for higher rate taxpayers, zero for additional rate). If you add up your total income and it is below £18,500 you won’t have to pay tax on your savings.
Dividend Allowance- The first £2,000 of dividends will not be taxable (this was £5,000 in 2017/18). Any dividend payments over this amount will be taxable at a person’s marginal rate. To determine what your marginal rate is, add up all of your taxable income including saving income and dividends then check the table below to see which tax rate applies to you.
Tax rates and bands for 2019/20
|First £37,500 of taxable income*||20%*|
|£37,501 - £150,000*||40%*|
|Starting rate - First £5,000 of savings interest**||0%|
|Standard savings rate - higher rate taxpayers will have a further 20% to pay, additional rate tax payers a further 25%||20%|
|Dividend income above the allowance but within basic rate tax limit||7.5%|
|As above but income between £50,001 and £150,000 higher rate tax limit||32.5%|
|As above but income above £150,000 the higher rate tax limit||38.1%|
|Inheritance tax Nil Rate Band (NRB)||£325,000|
|Residential Nil Rate Band (RNRB)||£150,000|
|Inheritance tax rate above NRB||40%|
|Capital Gains tax band - individual||£12,000|
|Capital Gains tax band - trust||£6,000|
|Capital Gains tax rate on excess of band up to basic rate limit||10%#|
|Capital Gains tax rate on excess of band above basic rate limit||20%#|
*In Scotland five new rates have been introduced for the 2019/20 tax year. The first £2,049 over the personal allowance of £12,500 is taxed at 19%, the next £10,395 at 20%, the next £18,486 at 21%, (£43,430), thereafter at 41% up to £150,000 and then 46% thereon.
**Only applies if your other (non-savings) income is below your allowances plus £5,000 for this tax year. Also consider the personal savings allowance mentioned above.
Note – Scottish tax payers should use the English rates and bands for their savings and investment income.
If you live in Wales, from 6th April 2019 you will pay new Welsh income tax rates, set by the Welsh Government. For the 2019/20 tax year, they are the same as the main rates and allowances listed above, as for England and Northern Ireland.
From April 2016 banks and building societies will no longer take tax at source and the R85, the form you used to sign to have your interest paid gross has been abolished. If your total income ignoring dividends is within the starting rate for savings and the PSA then you have nothing to do. If it is higher you need to contact HMRC to make sure any tax due is collected.
#An 8% surcharge applies for carried interest and for gains from residential property.
Rent a Room – The allowance has increased to £7,500 from April 2016.
Marriage Allowance: allowing claims on behalf of deceased partners – The Marriage Allowance allows taxpayers to transfer up to 10% of their unused PA to their partner, reducing their tax bill by up to £250 a year in 2019/20. The government will now allow claims in cases where a partner has died before the claim was made. These claims will be able to be backdated by up to 4 years
Property and trading income allowances – From April 2017, the government introduced a new £1,000 allowance for property income and a £1,000 allowance for trading income. Individuals with property income or trading income below £1,000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance. (Finance Bill 2017) (33)
Foreign pensions– From April 2017 foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents. This includes removing the rule under which currently only 90% of foreign pension income is charged to Income tax.
How tax is collected is changing -From April 2017 HMRC plan to collect as much tax as possible in the year it is due, where in the past it was often collected in the following year. This may mean that some people will have underpayments for earlier years and 2017-18 in their 2017-18 tax code. So, from April 2017 if your circumstances change for example, you start your state pension and there is tax to be collected, HMRC will try to collect it ‘in year’ by reducing your tax code. If this isn’t possible because it reduces another income by more than 50% or it is too late in the tax year, they will reduce your tax code in the following year as well. For larger amounts or if it isn’t possible to collect it through PAYE they will send you a ‘notice to charge’ which asks for payment. If you do not respond or pay by the 31st January after the end of the tax year you will be charged late payment penalties and interest. HMRC will still tot up at the end of the year and where there is an over or under payment will either repay you or tell you how to pay.
Simple Assessment - Simple Assessment is the way HMRC will collect PAYE underpayments (that can’t be collected under PAYE) without putting a person into the self- assessment system. It came into force in 2017 for the 2016-17 for underpayments over £3,000 and will increase to include more people this year. Pensioners who only have their State Pension which is over their personal allowance will also come into this new system. The deadlines for payment, late payment penalties & interest are the same as for the self- assessment system.
Rental income- From April 2017 finance costs (including mortgage and loan interest for furnishings) on residential properties are being restricted to the basic rate tax. Landlords will instead receive a basic rate reduction from their income tax liability for their finance costs. In 2017-18 the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction. This is being restricted further each year until 2020-21 when all financing costs will be given as a basic rate tax reduction.
The Lifetime ISA - The Budget announces that from 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the government on every pound they put in. Contributions can continue to be made with the bonus paid up to the age of 50. Funds can be used to buy a first home with the government bonus at any time from 12 months after opening the account, and can be withdrawn from the Lifetime ISA with the government bonus from age 60 for use in retirement.
The government will set the limit for property purchased using Lifetime ISA funds at £450,000. This limit will apply nationally. People can continue to open a Help to Buy: ISA until November 2019, as planned. They can also choose to open a Lifetime ISA, but will only be able to use the government bonus from one of their accounts to buy their first home.
Help to Save- To help the people who find it hardest to save, the government are planning to introduce a new Help to Save scheme for those on low incomes who wish to regularly set aside some of their income. It has been delayed until October 2018. The scheme will be open adults in receipt of Universal Credit with minimum weekly household earnings equivalent to 16 hours at the National Living Wage, or those in receipt of Working Tax Credit. It will work by providing a 50% government bonus on up to £50 of monthly savings into a Help to Save account. The bonus will be paid after two years with an option to save for a further two years, meaning that people can save up to £2,400 and benefit from government bonuses worth up to £1,200. People will be able to use the funds in any way they wish.
ISA contribution limit - The annual maximum which can be saved in an ISA will be increased from £15,240 in 2016/17 to £20,000 in 2017/18, 2018/19 and 2019/20.
If you are having problems with tax, call Tax Help on 0845 601 3321 or 01308 488066