By Lynne Gowers on 3rd April 2019

2019/20 tax rates and allowances

The Spring sunshine is starting to break through and everything is looking a bit greener… it must be April, and that means the start of a new tax year!

Here we consider the main revisions to income tax rates and allowances for 2019/20 and how these may affect how much tax you pay.

For a comprehensive reference guide to the latest tax rates, you can download and print off our 2019/20 Tax Cards, which will be useful all year round.

UK income tax rates for 2019/20

The most significant changes to income tax announced in the 2018 Autumn Budget, to take effect from 6th April 2019, were:

  • An increased tax-free Personal Allowance
  • An increased “higher rate” income tax threshold
  • Changes to the National Insurance lower and higher earning limits.

Tax rates if you live in England, Wales or Northern Ireland

What does this mean?

For the majority of taxpayers, these changes mean that:

  • You’ll be able to get an additional £650 a year, tax-free
  • You’ll pay the basic rate of tax, 20%, on an additional £3,000 a year before you go into the higher rate tax band.

The government originally planned to make these increases in 2020/21, but decided to bring them forward by a year. They estimate that 32 million people will have a lower tax bill as a result.

Having said that, the downside is the thresholds will stay the same in 2020/21, with the next revisions planned for 2021/22.

Tax rates if you live in Scotland

The main difference between Scotland’s income tax rates and those in England, Wales and Northern Ireland, is that Scotland has five tax bands as opposed to three in the rest of the UK.

National Insurance rates

Here’s a look at how the National Insurances rates for employees and the self-employed are changing from 6th April 2019.

The rules around who pays National Insurance remain unchanged.

Employees NI

Self-employed NI

Dividend Tax

Since 6th April 2018, limited company shareholders have been able to receive £2,000 in tax-free dividends from their company profits per tax year.

For 2019/20 there is no change to this allowance, or to the dividend tax rates shown below:

  • Basic rate: 7.5%
  • Higher rate: 32.5%
  • Additional rate: 38.1%

Corporation Tax

The rate of Corporation Tax for the year to 31st March 2020 remains fixed at 19%.

Value Added Tax – VAT

The standard rate of VAT for 2019/20 remains at 20%. The registration and deregistration levels also remain the same, at £85,000 and £83,000 per annum respectively.

From 1st April 2019 most businesses above the registration threshold must comply with the requirements of Making Tax Digital (MTD)

Find out more about MTD

Flat Rate Scheme (FRS)

The annual taxable turnover to enter the VAT Flat Rate Scheme is up to £150,000.
You must leave the scheme if your annual gross turnover exceeds £230,000.

What is the Flat Rate Scheme and is it for me?

Tax cards for 2019/20 – free download

We have produced a handy reference guide covering all the main tax rates and allowances for the 2019/20 tax year, along with key dates and deadlines. Get them free by clicking below.

Here’s to a successful and prosperous tax year for all of our clients and readers!

Written by Lynne Gowers
Disclaimer Although we attempt to ensure that the Information contained in this publication is accurate and up-to-date at the date of publication it may not be comprehensive, we accept no liability for the results of any action taken on the basis of the information they contain and any implied warranties, including but not limited to the implied warranties of satisfactory quality, fitness for a particular purpose, non-infringement and accuracy are excluded to the extent that they may be excluded as a matter of law.

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