Self-Assessment Tax Changes for 2019-20 Tax Year

Self-Assessment Tax Changes for 2019-20 Tax Year

Here in this article we have explained Self Assessment Tax Changes for the Year 2019-2020.

Allowances

Allowance 2019/20 2018/19
Personal Allowance£12,500£11,850
Married Couples Allowance (if born before 6th April 1935)£8,915£8,695
Blind Person’s Allowance£2,450£2,390
Marriage Allowance£1,250£1,190

Income tax rates and bands

Tax Rate2018/192017/18
Basic rate 20%£0 – 37,500£0 – 34,500
Higher Rate 40%£37,501 to £150,000£34,501 – £150,000
Additional Rate 45%£150,001+£150,001+

You don’t get a Personal Allowance on taxable income over £125,000

You pay income tax at the basic rate of 20% on your taxable earned income that falls within the basic rate band. The basic rate band for 2019/20 is £37,500.

If you have taxable earned income that exceeds the basic rate limit, you must pay more tax. This is firstly charged at the higher rate of 40% on the income above the basic rate limit. This means that in 2019/20 you pay tax at the rate of 40% on taxable earned income above the limit of £37,500.

If your taxable earned income exceeds the higher rate band limit, you must pay tax at the additional rate of 45% on the income above the limit. The higher rate band limit is £150,000 for 2019/20.

Example 1

  • Salary minus Personal Allowance: £60,000 – £12,500 = £47,500.
  • On this amount (£47,500), 20% will be applied to up to £37,500 and on the remaining amount it will be 40%.
  • Like this: 20% of £37,500 (out of £47,500), and 40% of £10000 (remaining of £47,500 minus £37,500). So, the tax paid will be £11,500.

Scottish income tax

BandBand nameScottish tax rate 2019-20
Over £12,500 to £14,549Starter Rate19%
Over £14,550 to £24,944Basic Rate20%
Over £24,945 to £43,430Intermediate Rate21%
Over £43,431 to £150,000Higher Rate41%
Over £150,000Top Rate46%

Personal allowance would be £12500.00 and same concept of reduced personal allowance would be there.

The Scottish Parliament has confirmed the rates and thresholds for income tax that will apply to the non-savings and non-dividend income of Scottish taxpayers from 6 April 2019

Non-savings and non-dividend income include income such as employment salary, income from pensions, profits from self-employment and rental profits.

You’ll also pay the same tax as the rest of the UK on dividends and savings interest.

Personal Savings Allowance (No Changes)

Additional rate taxpayers

2019-20

2018-19

Basic rate taxpayers£1,000£1,000
Higher rate taxpayers£500£500
Additional rate taxpayers£0£0

Starting rate for savings (No Changes)

You may also get up to £5,000 of interest tax-free. This is your starting rate for savings.

The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.

If your other income is £17,500 or more, You’re not eligible for the starting rate for savings if your other income is £17,500 or more.

If your other income is less than £17,500 Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

Example 2

  • You earn £17,000 of wages and get £200 interest on your savings.
  • Your Personal Allowance is £12,500. It’s used up by the first £12,500 of your wages.
  • The remaining £4,500 of your wages (£17,000 minus £12,500) reduces your starting rate for savings by £4,500
  • Your remaining starting rate for savings is £500 (£5,000 minus £4,500). You do not pay tax on your savings interest.

Dividend Taxes

Tax Rate

2019 / 20

2018 / 19

Dividend tax-free allowance20002000
Basic Rate7.5% on earnings up to £37,5007.5% on earnings up to £34,500
Higher Rate32.5% on earnings above the basic rate up to £150,00032.5% on earnings above the basic rate up to £150,000
Additional Rate38.1% on earnings above £150,00038.1% on earnings above £150,000

Example 3

  • You get £3000 in dividends in the 2019/20 tax year. The dividend allowance is £2000, so this means you pay tax on £1000 of your dividends.
  • Your other taxable income is £35,000. Add this to your dividends of £3000 and your total taxable income is £38,000.
  • You pay a rate of 7.5% on £1000 of dividends because your total taxable income is within the basic tax band.

Example 4

If Finlay has employment income of £47,650, savings income of £800 and dividend income of £2,000, he must pay tax at 20% on £35,150 of his employment income (the amount left once his £12,500 personal allowance is used). His adjusted net income is £50,450, so his personal savings allowance is £500. £500 of his savings income is free and he must pay tax at 20% on the remaining £300 (since it falls within the basic rate band). He does not have to pay any tax on his dividend income, however, as it is still covered by his dividend allowance of £2,000.

Trading and Property allowances (No Changes)

You may also have tax-free allowances for:

  • your first £1,000 of income from self-employment – this is your ‘trading allowance’
  • your first £1,000 of income from property you rent (unless you’re using the Rent a Room Scheme)
Trading and Property allowances2019 / 202018 / 19
When you are self-employed£1,000£1,000
When you are having income from property£1,000£1,000

Self-employed National Insurance contributions

Threshold and Rates2019-202018-19
Class 2 NIC threshold£6,365£6,205
Class 4 NIC threshold£8,632£8,424
Class 4 NIC rate9% on profits between
£8,632 and £50,000 and 2% on profits over £50,000
9% on profits between
£8,424 and £46,350 and 2% on profits over £46,350
Class 2 NIC rate£3 a week£2.95 a week

Capital Gains Tax

Annual exemption and rates2019/202018/19
Annual exemption from capital gains£12,000£11,700
As a basic rate taxpayerGains from other residential property18%18%
Gains from other chargeable assets10%10%
As a higher rate taxpayerGains from other residential property28%28%
Gains from other chargeable assets20%20%
Entrepreneurs’ Relief10%10%

Say, you earn £45,000 a year and sell some shares for £25,000 in 2018-19, after buying them for £5,000 two years ago. This gives you a profit of £20,000.

Your total taxable income is £45,000 – £12,500 = £32,500 Your taxable gain is £20,000 – £12,000 = £8,000

Your taxable income and taxable gain total = £40,500

The first £5,000 of your profit (£37,500 – £32,500) is taxed at 10% The final £3,000 of profit from the shares will be charged at 20% So, your total CGT bill is:
£500 (10% of £5,000) plus £600 (20% of £3,000) = £1,100.

Class 3 National Insurance (voluntary)

£ per week2019- 20202018- 2019
Class 3 rate15.0014.65

Pension contribution limits

Pension contribution limits2019/ 20202017/ 2018
Annual tax-free contribution limit (No Changes)£40,000£40,000
Lifetime tax-free allowance£1,055,000£1,030,000

Note that if you have an annual income of over £150,000 this annual allowance will be reduced. The same £150,000 threshold applies for 2019/20.

If you are filing your self assessment tax return first time, then you need to learn more about How to Complete Your First Self Assessment Tax Return

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