The new
financial year is in full swing, and it’s when the new rates and regulations
kick in. Your personal allowance has changed along with other vital thresholds
that take effect when it comes to completing your tax return.
Personal
Allowance
The new year
brings the new personal allowance at £12,500 for the year. So, what is your
personal allowance? Personal allowance is the amount of income in which you do
not have to pay tax on. You will pay tax on anything over the £12,500, the
table below will display what percentage of tax you pay in each band.
|
Tax Rate
|
Taxable Income
|
Band
|
|
0%
|
£0 -
£12,500
|
Personal
Allowance
|
|
20%
|
£12,501
- £50,000
|
Basic
Rate
|
|
40%
|
£50,001
- £150,000
|
Higher
Rate
|
|
45%
|
£150,000
+
|
Additional
Rate
|
You do not
get a personal allowance on taxable income over £125,000. Any income above this
threshold and tax will be due on all amounts to the respective band.
Dividend
Allowance
As well as
the personal allowance, the dividend rate has also changed. Just like a personal
allowance, you also have a dividend allowance. Dividends that fall in within
your personal allowance do not count towards your dividend allowance.
The tax you
pay depends on which Income Tax band you’re in.
|
Tax Rate
|
Band
|
|
0%
|
Dividend
Allowance of £2,000
|
|
7.5%
|
Basic
Rate
|
|
32.5%
|
Higher
Rate
|
|
38.1%
|
Additional
Rate
|
Example
Say you were
to get £4,000 in dividends in the 2019 to 2020 tax year. The dividend allowance
is £2,000, so this means you pay tax on £2,000 (£4,000 minus £2,000) of your
dividends. Your other taxable income is £30,000. Add this to your dividends of
£4,000 and your total taxable income is £34,000. You pay a rate of 7.5% on £2,000
of dividends because your total taxable income is within the basic tax band.
National
Minimum Wage
If you
employ staff, then you are probably aware that the National Minimum Wage rate
has also changed. It is a legal requirement to pay the NMW as an employer.
|
Year
|
25 +
|
21 to 24
|
18 to 20
|
Under 18
|
Apprentice
|
|
1st
April 2019
|
£8.21
|
£7.70
|
£6.15
|
£4.35
|
£3.90
|
For all the
rates mentioned, they usually change every year, typically in April. You must
be aware of these rates to make the most out of completing your tax return and
to fulfil your legal obligation. There are many other allowances and rates, but
the ones mentioned are the usual ones that affect everyone. If you are worried
about whether you are in the right tax band or not sure if you’ve used up all
of your allowance, please visit our website on www.crossaccountingservice.co.uk
or call us on 02920 653 995 where a member of staff can assist. We are always
happy to help.
