UK Personal Income Tax Rates 2019-20: All You Need to Know

Tax for small business

It’s the 6st of April and a new tax year. So, let’s have a look at the new UK income tax rates for 2019-20. Do they affect you and your tax bill?

What incomes taxes are changing in 2019-20

There is now only one significant budget during the year, and that is the autumn budget. The latest budget was the Budget 2018, the headline changes being:

  1. Annual Investment Allowance (AIA) has a temporary increase for two years.
  2. Increases to the higher rate income tax bands
  3. Increases to the tax free personal allowance
  4. Changes to the banding of National Insurance contributions

UK Income tax rates for 2019-20

These are the new income tax rates and thresholds for 2019-20:

Tax Rate (Band) Taxable Income 2019-20 Taxable income 2018-19 Tax Rate
Personal allowance Up to £12,500   Up to £11,850 0%
Basic rate £12,501 to £50,000   £11,851 to £46,350 20%
Higher rate £50,001 to £150,000   £46,351 to £150,000 40%
Additional rate Over £150,000   over £150,000 45%

Therefore, you start paying tax when you earn over £12,500.  You will then pay a tax rate of 20% up to £50,000 (up from £46,350). Please bear in mind that this is only for England, Wales and Northern Ireland. Scotland set their own income taxes.

On first look you will be:

  1. Getting an additional £650 tax free
  2. You’ll pay basic rate of tax on an additional £3,000 a year
  3. If your earning less, you will pay les tax and if you’re a higher earner you will pay less tax.

National Insurance changes for 2019-20

Lets now take a look at the the new National Insurance thresholds and rates for employees and the self-employed.

Employees

Rate 2019-20 Threshold 2018-19 Threshold
12% £8,632 to £50,000 £8,424 to £46,384
2% Over £50,000 Over £46,384

The main change here is that if you are in the higher income threshold you are going to be paying more tax, those savings you made a paragraph or two ago are now slightly lower.

The bracket has been increased by over £3000 to £50,000 and therefore you pay an additional £336.64 in tax – this is more than offset by your income tax saving over of over £800 (calculated on a £50k salary)

Self Employed

These bands have been realigned to match the threshold for employees.

Type 2019-20 Rate 2018/19 Rate
Class 2 £3.00 per week £2.95 per week
Class 4 9% on profits between £8,632 to £50,000 9% on profits between £8,424 to £46,350
Class 4 2% on profits over £50,000 2% on profits over £46,350

The big change – and not just for small businesses. The Annual Investment Allowance has been increased to £1million from £200,000. AIA is an allowance which allows you to deduct the full value of your new plant and machinery in the business against your tax bill.

This looks to be a bit of a Brexit measure with the hope of increasing investment to help businesses grow and become more productive.  This has been introduced for two years.

If you have any questions about tax, please don’t hesitate to talk to our accountants or book a free initial call.

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