As we enter the 2019/20 tax year, a number of key changes have taken place to several existing policies. It may be that some of these affect you, and it’s therefore important to consider the implications they may have when making financial decisions for the year ahead.
To help you navigate your way through the main changes, we’ve provided a summary of the focal points to come into play at the start of this tax year – here’s what you need to know.
Making use of your ISA allowance
With the new tax year comes a shiny new ISA allowance. You’re able to invest up to £20,000 in a cash or stocks and shares ISA without paying income or capital gains tax on any growth you achieve. Used wisely, your ISA allowance can be seen as a means to working towards your future goals.
State pension boost
If you’re entitled to the full single-tier state pension (if you hit state pension age after April 2016) your payments will increase from £164.35 to £168.60 – a boost of £4.25 a week. If you fall into this category you will recieve a pension of £8,767.
If you receive the full Basic State Pension (if you reached state pension age before April 2016,) then your pension will increase from £125.95 to £129.20, an increase of £3.25 per week. Total annual pension of £6,718.
Workplace pension contributions
From April 2019, the minimum amount people pay into their workplace pensions has risen. Minimum contributions from employees have been increased from 3% to 5% (including tax relief) under auto-enrolment rules. Employers will have also seen their minimum contributions go up from 2% to 3%.
Whilst means there might be less in your bank account come pay day, it gives you the opportunity to save more for your retirement in years to come.
Increase in the lifetime allowance
The maximum amount you can save into your pension over your lifetime, before an additional tax charged is applied, has increased from £1,030,000 to £1,055,000.
Increase to your personal allowance
The amount you can earn before you start to pay income tax – your personal allowance – has been increased from £11,850 to £12,500.
As a result, the basic-rate limit has seen a rise, meaning you can earn £50,000 before you’re moved into the higher-rate band, which has been increased from £46,351
You should bear in mind that you will lose £1 of Personal Allowance for every £2 of income over £100,000 – anyone with an income over £125,000 will lose their entire personal allowance.
Capital Gains Tax allowance rises
Capital Gains Tax (CGT) is a tax charged on the profits you make when selling assets, beyond the set annual allowance.
The annual allowance for the 2019/20 has risen from £11,700 to £12,000 – allowing people to make an extra £300 profit before capital gains tax is applied.
- The rates of CGT you pay depend on the amount of profit you make, your taxable income and whether your gain is from residential property or other assets.
- As a basic rate tax payer, you’ll pay 10% on any amount of profit which exceeds the annual exempt amount from selling assets, and 18% on residential property.
- As a higher or additional-rate tax payer you’ll pay 20% for other assets or 28% on residential property.
The good news
The good news from the changes implemented for the 2019/20 tax year is the overall amount of tax you’ll pay has little changed, and in some cases reduced.
Whilst you may have to pay more into your workplace pension, the more you save, the more you’ll hopefully have to contribute towards enjoying your retirement.
Taking action towards the beginning of the tax year may give you the opportunity to take advantage of appropriate reliefs, allowances and exemptions, which could make a difference to your financial future.