What are the key rates and bandings for the year ahead?

Income tax

All UK except Scotland (see below)

2018/19

2019/20

Basic rate 20% 20%
Higher rate 40% 40%
Additional rate 45% 45%
Starting rate for savings rate (applicable to savings income up to £5,000) 0% 0%
Basic rate taxpayers £1,000 £1,000
Higher rate taxpayers £500 £500
Additional rate taxpayers N/A N/A
Higher rate applies to taxable income above (up to £150,000) £34,500 £37,500
Additional rate applies to taxable income above £150,000 £150,000
Dividend nil rate band (the amount on which 0% tax applies) £2,000 £2,000
Dividend rate up to basic rate limit 7.5% 7.5%
Dividend rate up to higher rate limit 32.5% 32.5%
Dividend rate on income above higher rate limit 38.1% 38.1%

For 2018/2019 (and later years) the tax-free dividend allowance is reduced to £2,000. Dividends above this amount, but within the basic rate band, are taxed at 7.5%. The dividend you receive is the gross amount.

Basic rate taxpayers are able to receive up to £1,000 of savings income tax free. The limit is £500 for higher rate taxpayers. There is no savings allowance for additional rate taxpayers.

 

Income tax allowances and reliefs

2018/19

2019/20

Personal allowance £11,850 £12,500
Transferable personal allowance (marriage allowance) £1,190 £1,250

Personal allowances. Since 5 April 2010 personal allowances are withdrawn from those with taxable income above £100,000 at the rate of £1 for each £2 of taxable income received above that amount.

One spouse or civil partner can transfer up to 10% of their unused personal allowances to their partner as long as neither is liable higher or additional rate tax. Claims can be backdated for up to four years where conditions are met.

 

Scottish income tax

The Scottish tax rates apply to earned income only. Where a Scottish rate taxpayer has investment income the same rates apply to it as they would to taxpayers in the rest of the UK.

2018/19

2019/20

Personal tax-free allowance £11,850 £12,500
Starter rate 19% on income between £11,851 and £13,850 £12,501 and £14,549
Basic rate 20% on income between £13,851 and £24,000 £14,550 and £24,944
Intermediate rate 21% on income between £24,001 and £43,430 £24,945 and £43,430
Higher rate 40% on income between N/A N/A
Higher rate 41% on income between £43,431 and £150,000 £43,431 and £150,000
Additional rate 45% on income above N/A N/A
Top rate 46% on income above £150,000 £150,000

National Insurance

Description 2018/19 2019/20
Lower earnings limit, primary Class 1 (per week) £116 £118
Upper earnings limit, primary Class 1 (per week) £892 £9,692
Primary threshold (per week) £162 £166
Secondary threshold (per week) £162 £166
Upper secondary threshold for under 21s (per week) £892 £962
Apprentice upper secondary threshold for under 25s £892 £962
Employees up to the primary threshold and employers up to the secondary threshold. 0% 0%
Employees’ Class 1 rate between primary threshold and upper earnings limit 12% 12%
Employees’ Class 1 rate above upper earnings limit 2% 2%
Married women’s reduced rate between primary threshold and upper earnings limit 5.85% 5.85%
Married women’s rate above upper earnings limit 2% 2%
Employer’s secondary Class 1 rate above secondary threshold 13.8% 13.8%
Class 2 rate (per week) £2.95 £3.00
Class 2 small earnings exception (per year) £6,205 £6,365
Special Class 2 rate for share fishermen (per week) £3.60 £3.65
Special Class 2 rate for volunteer development workers (per week) £5.80 £5.90
Class 3 rate (per week) £14.65 £15.00
Class 4 lower profits limit (per year) £8,424 £8,632
Class 4 upper profits limit (per year) £46,350 £50,000
Class 4 rate between lower profits limit and upper profits limit 9% 9%
Class 4 rate above upper profits limit 2% 2%

Rent-a-room relief

Rent-a-room relief amount is set at £7,500. Individuals letting accommodation in their only or main residence, whether or not they are resident at the same time, as furnished accommodation are exempt on rental and related income (rent-a-room receipts) up to a limit of £7,500 a year.

Receipts in excess of £7,500 are taxed in full, but the taxpayer can elect to be taxed instead on either the full rent less expenses incurred under a normal rental business computation; or to be taxed on the rents in excess of the rent-a-room relief amount.

 

Trading allowance and property allowance

With effect from 6 April 2017 two new tax-free allowances are available to individuals with small amounts of income from trading or property rental sources. A “trading allowance” and a “property allowance”. Both allowances are £1,000 each.

In each case the £1,000 allowance applies to “income” (the receipts of the trade or property rental business) not profits.

 

Trading allowance

The trading allowance can be used against business income and certain miscellaneous income from providing assets or services in the course of a trade. Elections can be made so that the allowance is not given partially or at all. The amount of relief depends on whether the trading income exceeds £1,000.

If the income is less than £1,000, there is complete exemption and there is no need to notify HMRC or enter it on a tax return

If the income is more than £1,000 there is a choice. Either deduct actual business expenses or elect to treat the £1,000 as tax deductible in place of the actual expenses incurred.

A decision whether or not to elect can be made on a year-by-year basis.

There is no relief if the income has been received from:

an employer, or spouse’s (or civil partner’s) employer

a partnership in which you (or a connected party) are a partner

a close company in which you (or an associate) are a participator.

 

Property allowance

The property allowance can be used against rental income and certain miscellaneous income from providing assets or services in the course of a trade. Elections can be made so that the allowance is not given at all, or partially. The amount of relief depends on whether the income exceeds £1,000.

if the income is less than £1,000 there is complete exemption and there is no need to notify HMRC or enter it on a tax return.

if the income is more than £1,000 there is a choice. Either deduct actual property expenses or elect to treat the £1,000 as tax deductible in place of the actual expenses incurred.

A decision whether or not to elect can be made on a year-by-year basis.

The property allowance cannot be claimed where:

rent-a-room relief applies or could apply to the income; or

where the restriction (which took effect on 6 April 2017) on tax-deductible loan interest and other costs used to buy or improve residential accommodation applies.