If you have any questions regarding meeting your tax obligations, or planning ahead to utilise these, and other tax reliefs, please do not hesitate to contact our tax team.
The personal allowance for 2019/20 is £12,500 and this applies throughout the UK.
In England and Northern Ireland, the basic-rate band threshold increases to £37,500. This means that individuals who are entitled to a full personal allowance will not be liable to higher-rate tax in England and Northern Ireland until their total income exceeds £50,000 in 2019/20.
National insurance contributions are increasing to 12% on money earned between £46,350 and £50,000, with the capital gains tax annual exemption rising from £11,700 to £12,000. It is estimated that the changes will mean around 32 million income tax payers will see their bills cut.
Capital gains tax
The annual capital gains tax allowance increases to £12,000 for individuals and to £6,000 for most trusts.
However, Entrepreneur’s Relief which gives a capital gains tax break to investors who sell shares in an unlisted company, has seen the holding period to qualify raised from 12 months to 24.
The amount homeowners can pass on to their descendants has increased with a boost to the “residence nil-rate band” on inheritance tax (IHT). The basic amount anyone can pass on tax-free is £325,000, but the additional rate applying to property passed to a direct descendant has increased from £125,000 to £150,000, taking the tax-free allowance to £475,000.
Passing on assets to a spouse is tax-free and that spouse can then make use of both allowances, meaning the amount which can be passed on by a married couple will be £950,000. A further increase next year will bring this amount to £1m.
The overall annual ISA subscription limit remains at £20,000 while the junior ISA and child trust fund allowances increase to £4,368.
The pension lifetime allowance increases by £25,000 to £1.055 million. This is the limit on the amount retirees can amass in a pension without incurring additional taxes. Anything above this level can be taxed at a rate of 55% upon withdrawal. The allowance increases each year in line with inflation, but was drastically cut throughout George Osborne’s time of office from its previous high of £1.8m.
Meanwhile, the amount employees will pay into their pensions will increase to a total of 8% under the Government’s auto-enrolment scheme. The increase means employers must now pay in 3% of a saver’s salary while the individual must pay in 5%.
Buy to let
The next stage of the phased removal of mortgage interest relief has come into effect. Whilst landlords used to be able to claim the interest paid on their mortgages as a business expense to reduce their tax bill, now they will only be able to claim 25% of this amount as tax deductible ahead of the complete removal of the relief next year.
The van benefit charge will increase from £3,350 to £3,430 and the van fuel benefit charge will increase from £633 to £655.
Employees provided with fuel for private mileage in a company car will see the value of the multiplier used for calculating the cash equivalent of the fuel benefit increase from £23,400 to £24,100.
Making Tax Digital for businesses
Making Tax Digital (MTD) has now been introduced from 1 April 2019 for UK VAT registered businesses, who will be required to:
- Submit VAT information:
- Maintain digital records:
- Have digital links to records:
From April, HMRC’s online portal will close for VAT registered businesses and you will no longer be able to submit VAT returns this way. Now, submissions must be made digitally via HMRC’s Making Tax Digital API. Please note, the online portal will remain available for voluntarily VAT registered businesses with taxable turnover under £85,000 while this remains under the threshold.
You will need to maintain your records digitally. This means that transactional data (such as the time/value of each supply and the applicable VAT rate) must be stored digitally, on software or spreadsheets.
VAT returns must be linked to digital records. HMRC has announced a 12 months soft landing period, however this is very likely to be enforced in the future and we recommend preparing for this now.
Find out more about how we can assist businesses with Making Tax Digital here.
Contact our tax team to discuss your tax planning this tax year and how we can assist you to build a bespoke, tailor-made plan to meet your needs.