Welcome to the New Tax Year 2019/2020

Date Published: April 6, 2019

Category: HMRC News, MTD for VAT, Making Tax Digital, News, Tax Software

Welcome to the New Tax Year 2019/2020

A new tax year brings lots of new changes for you and your client. Here are the updates that are most likely to affect your clients.

BTCSoftware New Tax Year

What’s New for you and your clients?

This new tax year brings quite a few changes this 6th April

  • Tax-free personal allowance rises from £11,850 to 12,500
  • The total minimum contribution for pensions rises to 8%
  • National Living Wage and National Minimum Wage both increase
  • Welsh rates of Income Tax introduced

Updates to Income Tax rates and thresholds

Clients who are taxpayers in England, Wales or Northern Ireland are subject to a couple of changes for the 2019/2020 tax year. The tax-free personal allowance, for example, has increased from £11,850 to £12,500.

The new key rates and thresholds are outlined below:

Details2019/202018/19
Personal allowance£12,500£11,850
Employee’s and employer’s NI becomes due at£8,632£8,424
Higher rate tax becomes due at£50,000£46,350
Class 2 NI becomes due when profits pass£6,365£6,025
Class 2 NI per week£3.00£2.95

The government has also adjusted Class 4 National Insurance rates, which you can see here.

Changes for Welsh taxpayers

In another update, Welsh taxpayers may pay different rates of Income Tax. The table below lists the rates and bands for 2019/2020:

BandBand nameRate
£12,501 – £50,000Basic rate20%
£50,001 – £150,000Higher rate40%
Over £150,000Additional rate45%

Clients who are Welsh taxpayers will now notice a ‘C’ appearing at the beginning of their tax code, similar to the Scottish ‘S’ prefix.

Scottish Income Tax

Clients who are Scottish taxpayers are subject to a couple of different changes for the 2019/2020 tax period.

BandBand nameRate
£12,501 – £14,549Starter rate19%
£14,550 – £24,944Basic rate20%
£24,945 – £43,430Intermediate rate21%
£43,431 – £150,000Higher rate41%
Over £150,000Top rate46%

These rates and bands apply only to income which is neither dividend income nor savings income. For example, as a sole director of a limited company, a client may pay tax on their salary at Scottish rates, but they would pay UK rates on their dividend income.

Pension contributions to rise

The minimum contributions for automatic enrolment pensions continue to increase, with the 2019/2020 total minimum contribution of 5% rising to 8%. As before, the employer and employee can choose to pay more than the minimum contributions if they want to.

DateEmployer minimum contributionEmployee minimum contributionTotal minimum contribution
Before 5th April 20181%1%2%
6th April 2018 – 5th April 20192%3%5%
6th April 2019 onwards3%5%8%

Student loan thresholds increase

From this month, the interest rates and thresholds of income-contingent student loans have been adjusted.

The new threshold for plan 1 has risen from £18,330 to £18,935 – earnings above £18,935 will be calculated at 9%. For plan 2, the threshold for post-2012 loans will rise from £25,000 to £25,725.

The Department for Education has also introduced a new Postgraduate Loan (PGL) for England and Wales. The threshold for 2019/20 is £21,000, to be repaid at a rate of 6%, deductions collected through the normal PAYE process.

Payslip changes

From 6th April 2019, employers are obliged to include the total number of hours worked on payslips for employees whose wages vary by how much time they’ve worked.

National Living Wage/National Minimum Wage updates

As announced in the 2018 Autumn Budget, the National Living Wage (NLW) has now increased by 4.9% to £8.21 an hour for employees aged 25 and over, the highest recorded rise since 2016.

The National Minimum Wage (NMW) has also changed for workers aged 21-24, increasing from £7.38 to £7.70 an hour. The NMW will also rise for those aged 18-20 from £5.60 to £6.15 an hour and from £4.20 to £4.35 for employees under 18.

For more information

To talk to one of the BTCSoftware team about how our software solution can help you or book a demo here, call 0345 241 5030 or email Sales@BTCSoftware.co.uk or visit www.btcsoftware.co.uk

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