Key changes to be aware of for the 2019/20 income tax year
Alterations to Income Tax
Rules for the new income tax year 2019/20 mean that from April 6 2019 to 5 April 2020 the personal allowance will increase from £11,850 to £12,500. This is the amount you can earn annually, before you are required to pay tax (also known as free pay allowance). Earnings above £12,500 are taxed at a basic rate of 20% up to earnings of £37,500. The higher rate of tax at 40%, will be applied to earnings of £37,501 to £150,000. The tax rises to 45% on annual earnings above £150,000. Your personal allowance goes down by £1 for every £2 that income is over £100,000. Therefore, no Personal allowance is given to “adjusted net earnings” of £125,000 or more.
National Minimum Wage and National Living Wage
From April 1 2019 there will be an Increase to the hourly rate for the National Minimum Wage (NMW) and the National Living Wage (NLW), as shown below.
| Age | National Minimum Wage | National Living Wage |
| Apprentices* | £3.90 | |
| 16 and 17 | £4.35 | |
| 18 – 20 | £6.15 | |
| 21 – 24 | £7.70 | |
| 25 and over | £8.21 |
*Under 19, or 19 and over and in the first year of apprenticeship.
The difference between the National Living Wage and the National Minimum Wage, is that workers must be over 25 to qualify.
Employer Pension Contributions
All employers with staff in a pension scheme for automatic enrolment, will need to increase their compulsory contributions from 2% to 3% as from 6 April 2019 for the new Income Tax Year.
Capital Allowances
Remember that from 1 April 2019 the special rate pool (which includes expenditure on higher emission cars) will be reduced from the current 8% to 6%.
Digital Tax Registration – REMINDER
With less than a week to go until the new Income Tax Year, HMRC is urging those firms which haven’t signed up for the Making Tax Digital for VAT (MTD for VAT) scheme to do so ‘as soon as possible’.
It is also advising businesses which have yet to prepare to ‘get ready now’ for MTD for VAT.
Read our full Making Tax Digital blog post which includes latest HMRC compliant software links.
With these new changes coming into effect very shortly, it will have a financial impact on your business. Whether it’s an increase to wages and pensions, or a reduction in Capital Allowances you need to know how this will reflect on your profitability. If you are looking for some help with forecasting these costs then we can help you.
If you are worried about the coming Digital Tax Registration for VAT then we can explain how you need to prepare for MTD, the registration process and the steps required to ensure you are compliant.
