Income Tax Rates and Personal Allowances for 2019/20
Personal allowance means amount of money that you can earn before you start to be taxed. In UK Tax system, tax on your personal income is levied when you cross the limit specified by HMRC. Any taxpayer whose earnings are below the specified limit in a particular tax year is not eligible for paying income tax. It is known as Personal Tax Allowance or a tax free allowance. Income tax is always levied on the amount over and above the limit specified by HMRC. Certain individuals are entitled for a larger personal tax allowance as compared to others. It includes blind peoples, married couples in which at least one of the member was born before 6th April 1935 and if you are above 65 years.
Personal Tax allowance is considered as good news for UK citizens but considered as major disappointment to Her Majesty’s Revenue & Customs (HMRC) because it is the money which you are allowed to earn without paying any income tax on it. However, personal tax allowance in UK is not fixed for everyone.
- Your age.
- Your total income
- How much of your income is over & above your Personal Allowance?
- How much of your income falls within each tax band?
Steve works as a freelance web designer and he wants to understand how much tax he has to pay for the year 2018-19.
- His personal allowance for the year 2018-19 and
- His total income for the year 2018-19.
If his net total income for the year 2018-19 is £50,000 and his personal allowance entitlement is £11,850. In this case, his taxable profit is:
£50,000 - £11,850 = £38150 i.e. Steve will pay income tax only on £38,150 rather than paying on £50,000.
Personal Allowance and Income Limit Comparison
|Tax Year||Personal Allowance||Income Limits|
In the year 2018-19, UK Government increased the tax free allowance for year 2019-20 by £650 and this step is for sure a huge relief for the families having low income whereas the upper limit on income i.e. £100,000 remains the same.
Tax Free Personal Allowance for tax year 2019-20
The standard tax free personal allowance for tax year 2019-20 is £12500. This is the income on which you do not have to pay tax on.
In case you claim marriage allowance or blind person’s allowance, your personal allowance may be bigger whereas it is smaller if your income is above £100000.
Income Tax Rates & Bands 2019-20
|Bands||Taxable income||Tax rate|
|Personal allowance||Up to £12500||0%|
|Basic rate||£12501 to £50000||20%|
|Higher rate||£50001 to £150000||40%|
|Additional rates||Over £150000||45%|
You are not eligible for personal allowance on taxable income above £125000
|Allowances||2019 to 2020||2018 to 2019|
|Married Couple’s Allowance (minimum amount)||£3450||£3360|
|Married Couple’s Allowance (maximum amount)||£8915||£8695|
|Blind Person’s Allowance||£2,450||£2,390|
Income Tax Rates & Bands after Allowance deduction for 2019 to 2020
After deduction of allowances, tax is paid on the amount of remaining taxable income for which the table is given below –
|Band||Rate||Income after allowances 2019 to 2020||Income after allowances 2018 to 2019|
|Starting rate for savings||10% (0% from 2015 to 2016)||Up to £5,000||Up to £5,000|
|Starter rate in Scotland||19%||Up to £2,049||Up to £2,000|
|Basic rate in Scotland||20%||£2,050 to £12,444||£2,001 to £12,150|
|Basic rate in England & Northern Ireland||20%||Up to £37,500||Up to £34,500|
|Basic rate in Wales||20%||Up to £37,500||Up to £34,500|
|Intermediate rate in Scotland||21%||£12,445 to £39,930||£12,151 to £31,580|
|Higher rate in Scotland||40% (41% from 2018 to 2019)||£30,931 to £150,000||£31,581 to £150,000|
|Higher rate in England & Northern Ireland||40%||£37,501 to £150,000||£34,501 to £150,000|
|Higher rate in Wales||40%||£37,501 to £150,000||£34,501 to £150,000|
|Top rate in Scotland||46%||Over £150,000||Over £150,000|
|England & Northern Ireland Additional rate||45%||Over £150,000||Over £150,000|
|Wales Additional rate||45%||Over £150,000||Over £150,000|
Income Tax Rates, Thresholds and Changes for 2019/20
|Income Tax Band||2019/2020||2018/2019|
|Basic rate – It is applicable on those persons whose income lies in the lowest income tax band||20% on earnings between £12,501 and £50,0001 (you pay tax on £37,500)||20% on earnings between £11851 and £46,3501 (you pay tax on £34,500)|
|Higher rate – It is applicable on those persons whose income lies in the middle income tax band||40% on earnings between £50,001 and £150,0001||40% on earnings between £46,351 and £150,0001|
|Additional rate – It is applicable on those persons whose income lies in the highest income tax band.||45% on earnings above £150,0001||45% on earnings above £150,0001|
Dividend Tax Rates
There is no change in dividend tax rates for 2019/20. An individual can avail amount of £2000 as tax free dividend allowance.
|Tax payers||Dividend percentage|
|Basic rate taxpayers||7.5%|
|Higher rate tax payers||32.5%|
|Additional rate tax payers (From April 2013)||38.1%|
Scottish Income Tax Rates, Thresholds and Changes For 2019/20
|2019/20 tax year||2018/19 tax year|
|Band name||Tax Rate||Bands and Thresholds*|
|Starter rate||19%||£12,500* – £14,549||£11,850 – £13,850|
|Basic rate||20%||£14,550 – £24,944||£13,851 – £24,000|
|Intermediate||21%||£24,945 – £43,430||£24,001 – £44,273|
|Higher rate||41%||£43,431 – £150,000||£44,274 – £150,000||Additional rate||46%||Over £150,000||Over £150,000|
Note – Scottish residents are receiving personal allowance on tax free income of £12500 for 2019/20 tax year. The personal allowance is reduced by £1 for every £2 eared over £100000. It is applicable on rest of the UK.
National Insurance Rates
National insurance contributions are generally calculated on weekly basis rather than annual basis. National insurance rates are sometimes very confusing as things are also different for sole traders, employees and limited company directors.
Employee National Insurance Contribution Table
|Employee National Insurance contributions||2019/20||2018/19|
|Lower Earnings Limit – Individuals whose Earnings are below this specified limit will incur no NICs||£118||£6,136||£116||£6,032|
|Primary Threshold – Individuals whose earnings are below this specified limit will incur no NICs||£166||£8,632||£162||£8,424|
|Upper Earnings Limit – Individuals whose earnings are above the Primary Threshold limit and below the upper Earnings Limit will be taxed at 12%.||£962||£50,000||£892||£46,350|
|Individuals earning above the upper Earnings Limit will be taxed at 2%|
Employer National Insurance Contribution
|Employer National Insurance contributions||2019/20||2018/19|
|Secondary Threshold – Employees Salary payments above this threshold limit will incur Employer NICs at 13.8%.||£166||£8,632||£162||£8,424|
Self-Employed National Insurance Contribution
If you are self-employed, you need to pay national insurance contribution on your income for availing benefits like state pension & universal credit.
|Small profits threshold – Individuals earning below this threshold will incur no NICs.||£6,365||£6,205|
|Class 2 NICs – Individuals who are earning above the Small profits threshold||£3.00 per week||£2.95 per week|
|Lower Profits Limit – Individuals Earnings up to this limit will incur only Class 2 NICs. Over this limit incurs Class 4 NICs.||£8,632||£8,424|
|Upper Profits Limit – Individuals earnings up to this limit will incur: Class 2 NICs Class 4 NICs at 9% of the profit between the Lower Profits Limit and Upper Profits Limit.||£50,000||£46,350|
|Earnings above the Upper Profits Limit Any earnings above this limit will incur: Class 2 NICs Class 4 NICs at 9% of the profit between the Lower Profits Limit and Upper Profits Limit Class 4 NICs at 2% of the profit above the Upper Profits Limit.||Over £50,000||Over £46,350|
Capital Gains Tax
Capital gains tax is basically a tax you need to pay on the profits when you sell an asset that’s increased in value. It’s the profit you have to tax not the amount of money you are receiving on selling an asset.
Capital Gains Tax Rates
|Capital Gains Tax Rates||2019/20||2018/19|
|Annual exemption from capital gains||£12,000||£11,700|
|As a basic rate
|Gains from other residential property||18%||18%|
|Gains from other chargeable assets||10%||10%|
|As a higher rate
|Gains from other residential property||28%||28%|
|Gains from other chargeable assets||20%||20%|
|Entrepreneurs’ Relief (the lifetime limit on relief is £10 million)||10%||10%|
Company Tax Rates
Company tax rates are the rates at which taxes are paid by a company
Corporation Tax Rates
Corporation tax is the tax paid by limited companies on their profits.
|Corporation Tax rate||19%||19%|
You must go for VAT registration if your VAT taxable turnover exceeds £85000. You can also register for it voluntarily if your turnover is below £85000.
|VAT Registration threshold – You must do VAT registration, If your turnover exceeds the specified limit of £85000||£85,000||£85,000|
General VAT Rates
|Standard – The VAT rate which is applicable on most of the goods and services||20%||20%|
|Reduced rate – The lower VAT rate which is applicable on certain goods and services||5%||5%|
|Zero rate – The VAT rate applicable on some of the goods and services (food, children’s clothes etc.)
Note: this is not the same as items which are exempt from VAT
You can claim business mileage as expenses. Therefore, HMRC approved mileage rates as well as thresholds at specific rates to be availed as allowances are as follows –
|Vehicle types||First 10,000 miles||Over 10,000 miles|
|Car / van||£0.45||£0.25|
Director Loan Rate
A director loan is a loan borrowed by a director from the company except salary, dividend etc.
|Loan amount||2019/20 and 2018/19|
|If the loan amount exceeds the specified limit of £10,000 at any point of time during the year||Nominal interest of 2.5% is to be levied on the whole amount plus Class 1A National Insurance contributions (13.8%) and you may need to report it on your P11D form.|
How DNS helps?
DNS Associates is one of the leading UK firm with more than 10 years of experience in advising individuals about income tax rates chargeable & personal allowances availed to/by the taxpayers during a year.
For free consultation, you can call our DNS accountants at 03330602481 or e-mail us at firstname.lastname@example.org
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