The beginning of the 2019/20 tax year ushers in a handful of changes to tax and business legislation. Here, we outline some of the key measures to take note of.
Rising minimum wage
From 1 April 2019, the National Minimum Wage (NMW) and the National Living Wage (NLW) rates will rise.
The new hourly rates of pay applying from this date are as follows:
||National Minimum Wage
||National Living Wage
|16 and 17
|18 - 20
|21 - 24
|25 and over
*Under 19, or 19 and over in the first year of their apprenticeship.
Additionally, in the 2019 Spring Statement, Chancellor Philip Hammond announced that Professor Arindrajit Dube will undertake a review of the latest international evidence on the impact of minimum wages, to inform future NLW policy after 2020.
Alterations to income tax
In 2019/20, the income tax basic rate band will rise to £37,500. Consequently, the threshold at which the 40% band applies is £50,000 for taxpayers who are entitled to the full personal allowance (PA). Individuals pay tax at 45% on their income over £150,000.
From April 2019, the PA will rise from £11,850 to £12,500. Where an individual's 'adjusted net income' exceeds £125,000 in 2019/20, no PA is available.
The tax on income for taxpayers resident in Scotland is different to income tax paid elsewhere in the UK. In 2019/20, there are five income tax rates, which range between 19% and 46%. The two higher rates are 41% and 46%, as opposed to the 40% and 45% rates that apply to such income for other UK residents. For 2019/20, the threshold at which the 41% band applies is £43,430 for those who are entitled to the full PA.
Meanwhile, from April 2019, the Welsh government has the power to vary the rates of income tax payable by Welsh taxpayers. The Welsh rate of income tax has been set at 10p by the Welsh government: this will be added to the reduced rates. As a result, the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.
Changes to employer-provided cars
The scale of charges for working out the taxable benefit for an employee who has use of an employer-provided car is normally announced well in advance. Most cars are taxed by reference to bands of CO2 emissions, multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.
For 2018/19 there was generally a 2% increase in the percentage applied by each band. For 2019/20 the rates will increase by a further 3%.
Rising Residence Nil-Rate Band
The inheritance tax Residence Nil-Rate Band (RNRB), which was introduced in April 2017, will rise from £125,000 in 2018/19 to £150,000 for the 2019/20 tax year. The RNRB is designed to enable a 'family home' to be passed wholly or partially tax-free on death to direct descendants, such as children or grandchildren. It will increase to £175,000 in 2020/21. Thereafter it will rise in line with the Consumer Price Index.
Increase in compulsory employer pension contributions
As part of the pensions auto-enrolment scheme, employers are currently required to contribute at least 2% on the qualifying pensionable earnings for eligible jobholders. From 6 April 2019, this figure will increase to 3%.
Alterations to the Gift Aid Small Donations Scheme
Where small charitable donations are made, and it is impractical to obtain a Gift Aid declaration, individuals may choose to make use of the Gift Aid Small Donations Scheme (GASDS). The scheme currently applies to donations of £20 or less made by individuals in cash or contactless payments. From 6 April 2019, this limit will rise to £30.
As your accountants, we can advise you on how the measures taking effect from April 2019 could affect your business or personal finances. Please get in touch with us for more information.