Jack Bennett Accountant

What is in store for 2019?

Do you know how your tax bill will change in 2019? Tax is often a significant cost to businesses and individuals, so it is important to make sure you are up-to-date with the latest tax changes. This allows you to accurately forecast for your cashflow needs.

There are a wide variety of tax changes coming into place during 2019, but I have listed a few of the key changes, that will affect both businesses and individuals:

Income tax

  • The personal tax allowance for each individual is set to rise from 6 April 2019, from £11,850 to £12,500. This will give basic rate taxpayers a further £130 net income per year.
  • The basic rate tax band will increase from 6 April 2019, from £34,500 to £37,500, so individuals will only pay 20% tax on income up to £50,000.
  • The threshold for the 2% Employee NIC’s has been increased to £50,000 so the full rate of 12% will continue to be paid up to this level.

The following example shows the effect on the net income of an employee earning £50,000 per annum. For the purposes of this illustration I have not included any dividends. Whilst there is a reasonable saving on income tax, the additional NIC’s paid reduces this significantly.

Employee earning £50,000 2018/19 Tax paid   2019/20 Tax paid
Personal allowance £11,850 £      -   £12,500 £      -
Basic rate tax (20%) £34,500 £6,900   £37,500 £7,500  
Higher rate tax (40%) £3,650 £1,460   £      - £      -
     
Employee NIC's   £4,624     £4,964      
     
Total £50,000 £12,984   £50,000 £12,464
     
Employee net income   £37,016     £37,536      

 

 

   
Shareholder/director earning £50,000 2018/19 Tax paid   2019/20 Tax paid
Dividend allowance £2,000 £      -   £2,000 £      -
Personal allowance £11,850 £      -   £12,500 £      -  
Basic rate tax (7.5% on dividends) £32,500 £2,438   £35,500 £2,663  
Higher rate tax (32.5% on dividends) £5,650 £1,186   £      - £      -
     
Total £50,000 £3,624   £50,000 £2,663
     
Shareholder net income   £46,376     £47,337

The above calculation is based on the assumption of taking a nominal directors salary that is more than covered by the personal allowance.

Inheritance tax

  • The Residence Nil Rate Band (RNRB) will be increased from 6 April 2019, from £125,000 to £150,000 per person. This means that a married couple could benefit from an additional £50,000 to offset against the value of their estate, which at an IHT rate of 40% is the equivalent of a £20,000 tax saving for the couple.  This is subject to meeting a number of conditions including that their house is worth at least £300,000 and is left to qualifying beneficiaries (broadly their children).

Capital allowances

  • The government has introduced the ‘Structures and buildings allowance’ which allows the cost of works for a new build commercial property, or improvement to an existing property, to be claimed at a rate of 2% per annum on a straightline basis. In real terms, this means that for qualifying costs of £500,000 this would mean an allowance of £10,000 per year which would be set off against your tax bill.  This only applies to construction works that were started after 29 October 2018.

These are just a few of the key changes coming into place during 2019, which could save you and/or your business tax. Please ensure you take professional advice to maximise the tax savings available during 2019.