As the new financial year has begun we thought it would be useful to outline any changes the 2019/20 tax year will bring and how these changes will affect you…
State Pension: The new state pension has increased this tax year going from £164.35 to £168.60 per week. In addition, the basic state pension (applies to people who reached the state pension age prior to 6th April 2016) has increased from £125.95 to £129.20 per week.
*REMEMBER – IN ORDER TO QUALIFY FOR A FULL STATE PENSION, YOU MUST HAVE HAD AT LEAST 35 YEARS OF NATIONAL INSURANCE CONTRIBUTIONS. *
Annual Allowance: The Annual Allowance is a limit to the total amount of contributions that can be paid into defined contribution schemes, as well as the total amount of benefits that you can build up in the scheme in any given tax year. For this tax year there has been no change to the Annual Allowance and, so remains at £40,000 per year.
*NOTE: OTHER RULES, SUCH AS THE TAPERED ANNUAL ALLOWANCE AND CARRY FORWARD MAY APPLY, SO IT IS IMPORTANT THAT YOU TALK TO YOUR FINANCIAL ADVISER BEFORE MAKING ANY PENSION CONTRIBUTIONS. *
Money Purchase Annual Allowance: The Money Purchase Annual Allowance applies to people who have taken money out of their pension in excess of the tax-free cash and is the limit you can pay into your scheme without occurring an annual allowance charge. For the 2019/20 tax year, the Money Purchase Annual Allowance is £4,000.
Personal Allowance: The Personal Allowances is available to every UK resident and is the amount you get free from income tax. For the 2019/20 tax year the Personal Allowance has increased from £11,850 to £12,500. As a result of this, basic rate taxpayers will save around £130 per year!
Marriage Allowance: The 2019/20 tax year also sees the Marriage Allowance increasing. If your income is less than your annual tax allowance of £12,500, you may now be able to transfer up to £1,250 of your unused allowance to your spouse, so as a result they pay less tax.
Adult ISA: The ISA allowance for adults remains the same this tax year, so you can continue to contribute up to £20,000 per tax year into ISA arrangements where the funds can grow tax free from Income Tax and Capital Gains Tax.
Junior ISA: Junior ISAs are available for people up to 18 years of age and is a way for parents to contribute money each year in a tax efficient manner towards their children’s future. The Junior ISA allowance for this tax year has increased to £4,368 from £4,260.
Dividend Allowance: There are no changes to the dividend rates of tax, which apply to all UK tax payers, so the first £2,000 of dividend income is not subject to dividend tax. Remember – Any dividend income above the £2,000 threshold will be taxed at the following rates…
- 7.5% in Basic Rate income tax band
- 32.5% in Higher Rate income tax band
- 38.1% in Additional Rate income tax band
Every UK domicile receives a nil rate band, this is the amount up to which an estate has no Inheritance Tax to pay. For the 2019/20 tax year the nil rate band remains at £325,000. In addition to the nil rate band there is a residence nil rate band. This additional rate applying to property passed to a direct descendent has increased from £125,000 to £150,000. This means that the tax-free allowance in total be £475,000.
We hope this information has helped you understand the changes the new tax year has brought, however if you have any further questions please contact your adviser.