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Measure

Rates and allowances

The measure

Income tax

The Chancellor has increased the income tax personal allowance to £12,500 (from £11,850) and the basic rate band to £37,500 (from £34,500), giving a higher rate threshold of £50,000 for 2019/20. This increase means the Chancellor will meet the Conservative Manifesto pledge for a personal allowance of £12,500 and higher rate threshold of £50,000 a year earlier than planned.

The combined personal allowance and higher rate threshold changes will mean that a basic rate taxpayer will save £130 in 2019/20 compared to 2018/19 and a higher-rate taxpayer will save £860 in 2019/20 compared to 2018/19. Those with income over £125,000 who do not receive a personal allowance will see a tax saving of £600.

The Chancellor has also announced that the rates will remain the same in 2020/21 and will then increase in line with CPI from April 2021.

National insurance contributions

The national insurance contribution (NIC) limits for 2019/20 will rise broadly with the Consumer Prices Index (CPI). The upper earnings limit (above which the NIC rate is 2%) rises to £50,000 in line with the higher rate threshold, and the primary threshold for employees (above which NICs are payable) increases from £8,424 per annum to £8,632.

Taking account of NIC, a basic rate taxpayer will see an overall saving of £155 (income tax saving of £130 and NIC saving of £25), and a higher rate taxpayer will see a net saving of £520 (tax saving of £860 and NIC increase of £340). Those with income over £125,000 will see a net saving of £260 (tax reduction of £600 and NIC increase of £340).

Capital gains tax

The annual exemption will increase to £12,000 (from £11,700) from April 2019.

 

Who will be affected?

All individual taxpayers. 

 

When will the measure come into effect?

6 April 2019

Our view

The increases in the personal allowance, higher rate threshold and annual exemption will be welcome news to all taxpayers. Although national insurance costs will increase for many taxpayers, the income tax savings will offset this.

Contact

Mark Groom

Mark Groom

Partner

Global Employer Services Policy Lead

 
Patricia Mock

Patricia Mock

Director

Private Client Services Policy Lead