April here we come
The next tax year starts on the 6th April 2019 so this Saturday and as we all know nothing is as certain as tax and death, so let’s see what is going to be ahead of us.
Some of the changes might not affecting you, others might do.
One of the main change is that the personal allowance is going to increase for everyone who’s earning below £100k gross, from £11,850 in 2018/19 to £12,500 in 2019/20 tax year.
Personal allowance is the amount we can earn without paying income tax on it.
If you earn more than the personal allowance, you have to pay tax on the applicable rate on every penny earned above the personal allowance rate, but the personal allowance will remain tax free.
If you earn more than £100k but less than £125k than the personal allowance is decreasing with £1.00 for every £2.00 earned.
If you earn more than £125k gross you won’t be able to utilise the personal allowance.
If you are blind your personal allowance will also increase with an additional £2450.00 in 2019/20 which is an increase compared to the previous tax years £2390.00 (£60.00 increase).
The tax bands also changes in the next tax year once again as follows;
If you earn below the the personal allowance trashhold of £12,500; the tax rate is 0%
If you earn between £12,500 to £50,000; the tax rate is 20%
If you earn between £50,001 to £150,000; the tax rate is 40%
if you earn over £150,000; the tax rate is 45%
*please note, the personal allowance drops by £1.00 for every £2.00 earned over £100k gross salary earned.
As a side note, please bear in mind the income tax rates vary across the United Kingdom, for applicable rates in Scotland please check on the government portal here.
Another important allowance to mention is the personal savings allowance, it remains the same as in the current tax year so £1000 for basic rate tax payers and £500 for higher tax rate payers.
The national insurance rate are going to change also in the next tax year as follows;
No national insurance contribution payable if you earn less than £8632 gross salary
12% National insurance contribution payable if you earn between £8632 to £50,000 gross salary
12% National insurance contribution payable if you earn between £8632 to £50,000 gross salary and 2% on everything above £50,000.
Another important change for us investors is the increase in capital gain allowance, the CGT allowance is £11,700 in the current tax year of 2018/19 and going to increase to £12,000 in 2019/20.
There are exemptions for CGT such as lottery winning, main homes etc. Capital gain tax is payable by the sale of assets worth more than £6000.
Capital gain tax rates are as follows;
Standard CGT rate; 18% on residential property, 10% on other assets
Higher CGT rate; 28% on residential property, 20% on other assets
Dividend allowance which is super important to mention also for us investors and to bear in mind about its existence. I hope you use the most of your ISA allowance (20k in 2019/20 also) so you can ran your investments in the most optimalized way in regards of taxes.
Nothing changes in the next tax year of 2019/20 compared to the current tax year which is a kind of shame, but nothing we can do about it.
The dividend allowance remaines the same £2000 and the dividend tax rates are as going to remain as in the current tax year so;
Basic rate; 7.5%
Higher rate; 32.5%
Additional rate; 38.1%
*if your dividend earnings exceeding the £2000 dividend allowance rate outside of your Stocks and Shares ISA, you have to inform HMRC about it.
So these are going to be the main changes and main things to know about the next tax year.
Make sure you utilize all the benefits available to you and that you optimise your taxation in the most efficient way as it is extremely important part in wealth creation.
Your sincerely
To/Minimal
