Insights

Although there have not been many significant changes to tax legislation recently, there are still some important new previously announced policies taking effect.

Here are the changes to expect in the current tax year, effective from 6 April 2019

Personal tax

• The tax-free personal allowance increases from £11,850 to £12,500;
• The basic-rate tax band (including the personal allowance) also increases from £46,350 to £50,000 in England, Wales and Northern Ireland;
• Employee’s national insurance contributions increase to 12% on money earned between £46,350 and £50,000.

Inheritance tax

• The main threshold for 40% inheritance tax stays at £325,000 but some additional reliefs apply.
• The residence nil-rate band increases from £125,000 to £150,000. This can be added to the basic tax-free £325,000, for people who own their own home and leave it in their will to direct descendants such as children and grandchildren. It is not available to all taxpayers however; the main residence nil-rate band allowance will be reduced by £1 for every £2 by which the value of an estate exceeds £2m.

Pensions

• The old basic state pension rises to £129.20 a week and the new state pension rises to £168.60 a week.
• The pension lifetime allowance rises from £1,030,000 to £1,055,000. This is the maximum any taxpayer can hold in a pension without incurring tax penalties.
• Minimum auto-enrolment contributions paid into workplace pensions increase from 5% (with at least 2% from the employer) to 8% (with at least 3% coming from the employer).
• The overall annual allowance remains at £40,000 together with other pension allowances including the “annual allowance taper”, which reduces pension relief for those with a yearly income above £150,000.

ISAs

• The amount that can be contributed to Junior ISAs increases from £4,260 to £4,368.
• The annual amount that can be sheltered across adult ISAs remains at £20,000 per person for the 2019-20 tax year.

Capital Gains Tax

• The capital gains tax annual exemption is £12,000.
• Above this amount, for disposals of all assets except for residential property gains falling within the lower rate tax band attract capital gains tax at the rate of 10%, and gains falling within the higher and additional rate tax bands attract capital gains tax at the rate of 20%
• Chargeable gains arising on residential property such as second properties and buy-to-let properties attract capital gains tax at the rate of 18% where the gain falls within the lower rate tax band and at the rate of 28% where the gain falls within the higher and additional rate tax bands.
• Assets on which entrepreneurs’ relief can be claimed must now have been held for a minimum period of 24 months in addition to meeting other additional criteria (see our separate article on changes to ER).

If you would like advice on how to reduce your tax bills and pay the legal minimum, please get in touch to review your circumstances.