Take Note: 5 Changes to Personal and Business Tax from April 2019
With the 6 April marking the start of a fresh new tax year, change is most certainly afoot in 2019. As a crucial part of your annual housekeeping, it’s worth taking a moment to familiarise yourself with the changes to tax – both personally and professionally – that may impact your finances. Whether this be updates to the National Living Wage or benefit in kind (BiK) tax rates for your company car, we explore this year’s key revisions from HMRC to help directors and business owners stay tax-savvy.
With the new earnings cap now at £12,500, the UK Personal Allowance – the amount you make before having to pay Income Tax – increased by £650 on the 6th of April this year. As a result, this equates to a £130 reduction for the majority of taxpayers. For those paying the Higher Rate of Income Tax at 40%, this increased by £3,650 to the new threshold of £50,000 (including the increased Personal Allowance). In other personal tax updates, the Capital Gains Tax yearly exempt figure has risen from £11,700 to £12,000. Those looking to qualify for Entrepreneurs’ Relief have also received an extension as of this April, now with 24 months to ensure all conditions are met.
National Minimum Wage and National Living Wage
Technically not a ‘tax year’ change, but nevertheless; National Minimum Wage and National Living Wage rates rose on the 1st of April across the board. While apprentices should now be paid £3.90 per hour, those under 18 should be paid £4.35, those between 18-20 now £6.15, those between 21-24 now £7.70, and employees aged 25+ now £8.21 (the highest increase of 38p from £7.83). If you’re considering hiring an apprentice, this band of employee is entitled to the minimum wage of £3.30 so long as they are 19 or over and have successfully completed the first year of their apprenticeship.
If your business pays for any fuel (or vehicle) your employees use personally, the benefit in kind (BiK) tax rate has now increased based on the Vehicle Certification Agency’s CO2 emissions report; HMRC’s ready reckoner can be used to calculate what you owe. For company vans, the set amount has risen to £3,430 (an £80 increase), while fuel for a personal van has risen to £655 (a £22 increase). When it comes to cars, it gets slightly trickier. Business owners/employees with company cars who also receive free fuel are taxed on the benefit’s cash equivalent value. This is fixed every year, and increased to £24,100 from the 6th of April. The BiK is calculated using the relevant percentage (company car benefit rate) which is then multiplied by the fixed amount of £24,100 for 2019/20.
For post-grad business owners looking to shift their debt from yesteryear, the Department for Education announced an increased threshold on earnings before repaying a student loan. Plan 1 loans have now risen to £18,935 (from £18,330), while Plan 2 loans have increased to £25,725 (from £25,000) as of the 6th of April. Directors paid a salary and dividends from their company should also note that this is calculated based on their income as a whole. This change will also affect those businesses enrolling new staff this year, as HR departments will need to double-check their employees’ specific loan plans to ensure the correct deductions are made.
Corporation Tax and Workplace Pensions
While this year’s Corporation Tax has remained at 19%, it’s worth mentioning the government’s plans to reduce this rate to 17% from the 6th of April, 2020. Where workplace pensions are concerned, some rather big adjustments have been made. The total minimum contribution for the auto enrolment workplace pension has now increased to 8% (up from 5%). For businesses, this means a new minimum contribution of 3% (a 1% increase), with employees now required to contribute up to 5% of the remainder (a 2% increase) of their monthly salary to make up the 8%. Finally, the Annual Investment Allowance (AIA) for expenditure incurred between the 1st of January 2019 and the 31st of December 2020 on fixed assets (e.g. plant machinery) was increased from the start of the year from £200,000 to £1,000,000, in a bid to help grow the nation’s businesses.
Whatever your needs for the new tax year ahead, Adams Moore offers a whole host of services to help you achieve your business goals – from start-up advice to sole trader accountancy. For a friendly chat, contact our team of professionals today.