The new tax year started on 6 April 2019. There are some changes that are set to take effect for the 2019/2020 year. Every year, there are modifications to the tax threshold, rates, and allowances. These are the main factors that will affect individuals and businesses:
Higher Tax-free Personal Allowance
Personal allowance, which is the amount you can earn tax-free before income tax takes effect, will rise to £12,500. For incomes ranging from £12,500 to £50,000, the basic tax rate is 20%. The higher tax rate which is 40% doesn’t take effect until you earn over £50,000.
An increase in the Family Home Allowance
The tax-free threshold remains the same as £325,000. The residence nil rate or family home allowance gives an inheritance tax break in addition to the tax-free threshold. The inheritance tax rate for 2019 is £150,000. It has been increasing at a rate of £25,000 since 2017 with £100,000. This means that married couples can increase their allowance up to £950,000. This is because a family home worth up to £475,000 can be passed to a descendant tax-free, then the spouse can take advantage of both allowances.
Digitally Submitted Tax Reports
From 7 August 2019, the tax reports filed will have to be digital. This applies to all registered businesses with taxable turnover above the VAT registration threshold. They are now required to keep the records in digital form. Their VAT returns are to be filed using the software. The software to be used by these businesses must be able to :
- Keep and maintain records specified in the regulations.
- Prepare their VAT records using the information maintained in the digital records.
- Communicate with HMRC digitally through their Application Programming Interface (API) platform.
Increase of Auto-Enrolment Contributions
This applies to employers with staff between the ages of 22 and state pension age. This means your minimum contribution to you and your staff’s pay into an automatic enrolment workspace pension scheme has increased. The employer minimum contribution increased from 2% to 3%, and the staff contribution increased from 3% to 5%.
Increase in Lifetime Allowance
Lifetime allowance on pension contributions, which is the personal pension paid has increased. It is the maximum amount a retiree can get in a pension without the need to pay additional tax which could be up to 55%. It was increased with respect to inflation, which is the consumer price index for this tax year. The amount increased from £1.030 million last year to £1.055 million, which is a £25,000 increase.
Increase in Annual Exception for Capital gains.
The capital gains tax as annual exceptions for capital gains has increased from £11,700 to £12,000. This means that £12,000 can be made before capital gains tax is paid. The other percentages remain the same as last year which are:
- Capital gains tax as a basic rate taxpayer – 18%
- Capital gains from other chargeable assets – 10%
- Capital gains tax as a higher rate taxpayer – 28%
- Capital gains from other chargeable assets – 20%
When the new fiscal year comes, it is paramount to keep a note of these changes, so you are well prepared and not caught off guard.
For more information about deductible expenses as well as your personal or business taxes in Bristol and other areas, you can get in touch with us. Contact Paul on 07950 425 425 or email us at email@example.com.