Income tax The UK personal allowance, tax rates and bands for 2019/20 were announced by the Chancellor in the 2018 Autumn Budget. The income tax rates and bands applying from 6 April 2019 in England and Northern Ireland are outlined below:
Making Tax Digital (MTD)
HMRC is phasing in its Making Tax Digital regime, which will ultimately require taxpayers to move to a fully digital tax system. Under the new rules, businesses with a taxable turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software. The new rules take effect from 1 April 2019 where a taxpayer has a ‘prescribed accounting period’ which begins on that date, or otherwise from the first day of a taxpayer’s first prescribed accounting period beginning after 1 April 2019. For
Band (£)
Rate (%)
0 - 37,500
20
37,501 - 150,000
40
Over 150,000
45
Savings income
Starting rate for savings
0%
some VAT-registered businesses with more complex requirements, the rules will not
Starting rate limit for savings £5,000 Not available if the taxable non-savings income exceeds the starting rate band. £1,000 of savings income for basic rate taxpayers (£500 for higher rate) may be tax-free. Dividend income
take effect until 1 October 2019. Included in the deferred start date category are VAT divisions, VAT groups and businesses using the annual accounting scheme. In the Spring Statement the Chancellor confirmed that the focus will be on supporting businesses to transition and the government will therefore not be mandating MTD for any new taxes or businesses in 2020.
Dividend ordinary rate
7.5%
Dividend upper rate
32.5%
Dividend additional rate
38.1%
The first £2,000 of dividends are tax-free.
Changes to Entrepreneurs’ Relief Increase in the minimum qualifying period The minimum period throughout which certain conditions must be met to qualify for Entrepreneurs’ Relief (ER) is being increased from one year to two years. This has effect for disposals on or after 6 April 2019, except where a business ceased before 29 October 2018. Where the claimant's business ceased, or their personal company ceased to be a trading company (or the holding company of a trading group) before 29 October 2018, the existing one year qualifying period continues to apply. The new 5% rules for company shareholders To qualify for ER, the company needs to be an individual’s ‘personal company’. This means that an individual must, throughout the relevant qualifying period: • be a company employee or office holder • hold at least 5% of the company’s ordinary share capital; and • be able to exercise at least 5% of the voting rights. For disposals on or after 29 October 2018, an individual must also satisfy either of the following: • distribution tests which require the individual, by virtue of that holding, to be entitled to at least 5% of the company’s profits available for distribution to ‘equity holders’ and 5% of the assets available for distribution to ‘equity holders’ in a winding up; or • a proceeds test which requires the individual, in the event of a disposal of the whole of the ordinary share capital of the company, to be beneficially entitled to at least 5% of the proceeds.
Scottish residents The tax on income (other than savings and dividend income) is different for taxpayers who are resident in Scotland to taxpayers resident elsewhere in the UK. The Scottish income tax rates and bands apply to income such as employment income, self-employed trade profits and property income. The new Scottish income tax rates and bands for 2019/20, applicable to non-savings and non-dividend income, are summarised below:
Band (£)
Band name Rate (%)
0 - 2,049
Starter
19
2,050 - 12,444
Scottish Basic
20
12,445 - 30,930
Intermediate
21
30,931 - 150,000
Higher
41
Over 150,000
Top
46
Welsh residents From April 2019, the Welsh government has the right to vary the rates of income tax payable by Welsh taxpayers. The UK government has reduced each of the three rates of income tax paid by Welsh taxpayers by 10p. The Welsh government has set the Welsh rate of income tax at 10p, which will be added to the reduced rates. This means the tax payable by Welsh taxpayers continues to be the same as that payable by English and Northern Irish taxpayers.
Made with FlippingBook flipbook maker