New Tax Year Changes for 2019/20

On April 6th 2019, a number of new rules will come into effect which will have a significant impact on the personal financial situation of various individuals.

Personal Allowance
The Chancellor announced in his 2018 Budget that the increase in the personal allowance would go from £11,850 to £12,500, a year early.  The basic-rate tax band would also be increasing from £46,350 to £50,000.

Also announced was the increase in national insurance contributions to 12% on monies earned between £46,350 and £50,000, which will contradict a lot of the savings from the higher-rate increase.

Looking at both these announcements, in effect not much has changed for those paying tax in the higher-rate band.  But on the other side, 32 million people will benefit from the personal allowance rise when it comes into force on 6th April 2019.

Inheritance Tax
The tax-free amount for inheritance tax (IHT) will still be £325,000 from 6th April 2019, however the additional £125,000 (if passing on the home to a direct descendant or spouse) will rise to £150,000.

However, anyone with an estate valued at more than £2 Million will lose that allowance by £1 for every £2 they are over the limit.

The pensions Lifetime Allowance will rise from £1.03 Million to £1.055 Million in the new Tax Year in line with the Consumer Price Index.  Although the allowance will be rising by £25,000 it will not have much of an effect as the annual (contribution) allowance still remains at £40,000, and also reduces to £10,000 for those earning over £210,000 a year.

For many years now, increasing numbers of people have been actively looking to more diversified retirement portfolios as they look to reduce the effects of the reduction to the pensions annual allowance.  Venture Capital Trusts (VCTs) as well as shares qualifying under Enterprise Investment Schemes, are some the tax efficient vehicles more and more people are turning to, if it suits their circumstances and attitude to investment risk.

Stamp Duty
It was announced in last year’s Budget that there would be an extension to the stamp duty cut for first-time buyers for shared ownership up to £500,000, and that it would be backdated to 2017.

It is very rare for a Chancellor to make tax changes which can/will be applied retrospectively.

First-time buyers of certain shared ownership properties will therefore be able to claim back stamp duty they have paid over the last year.

Capital Gains Tax
From April 6th the scope of Capital Gains Tax will be broadened for non-UK tax residents to include disposals of all real estate located in the UK, not just residential property.  This is viewed as a wider crackdown on Landlords, and other changes which are coming into effect in 2020 will only intensify that feeling.

Come April, everyone’s attention will no doubt be on Brexit and the uncertainty being the main concern.  However, for most individuals, the tax landscape is a domestic issue and life will carry on, regardless of Brexit.

The personal finance landscape for many people could be changing significantly with the number of changes that are coming in the new tax year, including the end of the Help-to-Buy ISA and a rise in auto-enrolment pension rates.

As always we are on hand if you are concerned about any of the new changes coming in the new Tax Year and if you wish to discuss, please don’t hesitate to give us a call.