2019/2020 Tax changes: what you need to know

The 2019/2020 tax year has just started, so we’ve put together a list of the most important changes.

Good for most, great for people selling property or businesses – but less so for people with company cars.

Higher Personal Allowance and Income Tax thresholds

The annual tax-free personal allowance has increased from £11,850 to £12,500.

That means that most of us will pay £130 less in income tax this year.

That’s not all: the threshold for the Higher Rate of income tax (40%) has also just increased to £50,000.

Higher pensions allowance

The lifetime allowance for pension savings has increased to £1,055,000 (from £1,030,000).

Now you can save even more for your retirement.

Higher Capital Gains allowance

The Capital Gains Tax allowance has also increased to £12,000 (from £11,700 in 2018/19).

That is an extra £300 tax-free annual allowance for anyone selling a second property, shares, cryptocurrencies, or other assets.

You can take more in dividends

The Dividend Allowance has remained at £2,000.

However, as the tax thresholds increased you are now able to take more in dividends before paying the higher dividend tax rate.

Entrepreneurs’ Relief got easier to claim

The minimum period throughout which the qualifying conditions for Entrepreneurs’ Relief must be met has been extended to 24 months.

So for the 2019/20 tax year (which ends on April 5, 2020), your new deadline to claim is now January 31, 2022.

New income tax bands in Scotland as well

The 2018 Scottish Budget announcement introduced a a few changes for the 2019/20 tax year, one of the most important being the new income tax bands and thresholds:

BandTax Rate2018/19 ThresholdsNew 2019/20 Thresholds
Personal Allowance0 %up to £11,850up to £12,500
Starter Rate19 %from £11,851 to £13,850from £12,501 to £14,550
Basic Rate20 %from £13,851 to £24,000from £14,551 to £24,945
Intermediate Rate21 %from £24,001 to £44,273from £24,946 to £43,430
Higher Rate41 %from £44,274 to £150,000from £43,431 to £150,000
Additional Rate46 %Over £150,000Over £150,000

Finally: company cars, vans, and fuel benefit tax will increase

From 6th April 2019, benefit in kind tax rates are increasing for company cars.

Tax on company vans will increase

When your company pays for fuel you have used personally or allows personal use of a company van, it is a benefit in kind and you must pay tax for it:

  • the benefit in kind on company vans increases to £3,430 (from £3,350)
  • the benefit in kind on fuel for a van provided for personal use increases to £655 (from £633).
Tax on company cars will also increase

An employee provided with a company car and who also receives free fuel from the employer is taxed on the cash equivalent value of this benefit.

How is it calculated?

  1. Work out the rate that applies to your company car (this rate depends on a ton of things, from how much CO2 it spits out to your income bracket – just use this HMRC car tax calculator
  2. Multiply this rate with the fixed cash equivalent of this benefit – in 2019/20 it has increased to £24,100 (from £23,400)
  3. The result is how much you need to pay.

For example: if the benefit in kind percentage for your company car is 10%, your benefit in kind amount on the fuel provided for personal use is £2,410 (10% of £24,100).

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