Income Tax and Capital Gains Tax
The personal allowance is increasing by just over 5% to £12,500 across the UK, meaning any individual with taxable income up to that amount in the tax year ending 5 April 2020 will not pay any income tax at all. A typical basic-rate taxpayer will take home £130 more than they did in 2018/19.
At the same time, the basic rate tax band (for England, Wales and Northern Ireland) is increasing to £37,500, meaning that individuals will be able to have total income of up to £50,000 before they pay income tax at the higher rate. Scottish taxpayers are subject to different rules and thresholds, following the introduction of a fivetiered income tax system last year.
The Capital Gains Tax (CGT) Annual Exemption is increasing to £12,000 with effect from 6 April 2019, meaning that each individual can realise chargeable gains of up to £12,000 in the tax year ending 5 April 2020, net of losses, in aggregate, without incurring any liability to CGT. The balance of chargeable gains will continue to be taxed at 10%, 18%, 20% or 28%, depending on the type of asset being disposed of.
Residence Nil-Rate Band
Whilst the Inheritance Tax threshold (‘Nil-Rate Band’) remains unchanged at £325,000, the Residence Nil-Rate Band (RNRB) is rising from £125,000 to £150,000 for deaths on or after 6 April 2019.
You may recall that our February article focused on the RNRB in detail but in broad terms, it provides an additional nil-rate band on death but can only be applied to the value of residential property inherited by direct descendants on an individual’s death (the precise rules are complex).
National Living and Minimum Wage
April 2019 also sees increases to the National Living Wage (NLW) and the National Minimum Wage (NMW). The NLW applies to workers aged 25 and above and is increased to £8.21 per hour.
The NMW applies to those workers aged under 25 and is set at four different rates. For those aged 21-24 it is £7.70 per hour, 18-20 year olds must be paid £6.15 or more and the rate for those aged under 18 is £4.35 per hour. There is a special rate of £3.90 per hour for apprentices aged under 19 and those aged 19 and over but who are in their first year of apprenticeship.
Pension Automatic Enrolment Contributions
With effect from 6 April 2019, the minimum contributions payable under the Automatic Enrolment legislation will increase, both for employers and for employees who are members of an Automatic Enrolment pension scheme. All employers have a legal obligation to make sure that these increases are implemented, to ensure that minimum contributions are paid.
The minimum employer contribution is increasing from 2% to 3% and the employee contribution is increasing further from 3% to 5%, as follows:
All employers should be aware of these changes and, where possible, factor them into your business’s pricing structures, in order to attempt to maintain existing margins. Employees will also need to be prepared for a reduction in their net pay packets due to the increased minimum employee contributions.
Making Tax Digital for VAT
VAT-registered businesses with an annual taxable turnover above the registration threshold of £85,000 have new requirements for record-keeping and submission of VAT Returns.
Many businesses will already be used to filing their VAT return online through HMRC’s gateway, but under MTD for VAT, this in isolation will no longer be an option and the new requirements represent a major change. Taking effect for VAT Return periods commencing on or after 1 April 2019, affected businesses will have to keep digital records for VAT purposes and file their VAT returns digitally using MTD-compatible software. This software must be capable of recording and preserving records in a digital form, sending VAT returns and information to HMRC.