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Friday August 23 2019

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Village Features

Ringing the changes of the new tax year

Posted on March 30 2019 at 1:45:25

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Tie up loose ends and plan for changes to savings and pensions, writes Martin Pryor.

The tax year 2018/19 ends on Friday April 5, which means it’s time to start planning for the new tax year and tie up the loose ends of the old one.

Planning for the new tax year is now affected by the shift of the Budget schedule to autumn.

The result is that changes announced in October, or in Scotland’s December Budget, have now passed into legislation in time for the new tax year. So, what does 2019/20 hold in store?

A higher personal allowance
The first £12,500 of income for most people in the UK will be free of income tax from 6 April 2019.

An increased higher rate threshold, outside Scotland
The higher rate income tax threshold (the personal allowance + the basic rate band) will rise to £50,000 for England, Wales and Northern Ireland.

This considerable jump of nearly 8% could mean it is worth reviewing how married couples and civil partners own their investments to ensure income falls into the right hands. In Scotland, the threshold stays unchanged at £43,430.

An increased national insurance contributions (NICs) upper threshold
The UK-wide upper threshold for full rate NICs (12% for employees) will also increase by nearly 8% to £50,000 from 6 April, potentially clawing back some, or in Scotland, almost all of your income tax savings.

However, the increase does offer more scope to potentially gain benefits from salary sacrifice arrangements for pension contributions.

Personal pensions
The lifetime allowance will rise by almost £25,000, to £1.055 million, for 2019/20 – roughly enough to buy a 65-year-old a guaranteed inflation-proofed income of around £34,000 a year, based on current annuity rates.

The annual allowance and its associated taper limits remain unchanged. So it’s all the more important to check whether you have any unused allowance from 2015/16 to carry forward before 6 April arrives, given you can only carry forward the previous three tax years, and the opportunity disappears.

Employer pensions
The minimum level of pension contributions for automatic enrolment increases from 6 April 2019.

For employers, the minimum rate rises from 2% to 3% of ‘band earnings’ £6,136–£50,000 in 2019/20), while employees must pay enough to bring the total up to 8% including tax relief.

As the band’s upper limit has risen in line with the NIC upper threshold, there is a double sting if you earn above £46,454.

Individual Savings Accounts (ISAs)
Only the Junior ISA investment limit will increase in 2019/20, and that by only £108 per year.

It will be the third successive year the overall ISA limit has been fixed at £20,000, a reminder of the wisdom of contributing as much as you can each year (including 2018/19, if you have not already done so).

One popular ISA variant, the Help-to-Buy ISA, will disappear for new investors (aged 16 upwards) from December 2019.

Capital gains tax (CGT)
The CGT annual exempt amount increases to £12,000 in 2019/20. The new annual exempt amount could result in a potential tax saving of up to £2,400 (£3,360 in the case of residential property).

If you have not used your 2018/19 exemption, combining the two with sales straddling the tax years could remove £23,700 of gains from tax. That might provide the funds to top up ISAs and pensions.

The value of tax reliefs depends on your individual circumstances.

Tax laws can change.

The Financial Conduct Authority does not regulate tax advice.

The value of your investment, and any income from it, can go down as well as up and you may not get back the full amount you invested.

For specific tax advice please refer to your tax specialist or accountant.

Contact Pryor Portfolio Management for more information:
Tel: 07961 162818
.(JavaScript must be enabled to view this email address)
http://www.ppm-ifa.co.uk


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