Important information about the 2019/2020 tax year.
As the 2018/2019 tax year came to a close, the beginning of April 2019 saw many important changes to financial rules and regulations. Here are my top things to take note of.
1. Income Tax Rates
Scotland has different tax thresholds from the rest of the UK and I have outlined the new thresholds and tax percentages below. This is determined by the employee’s residential address.
Starter rate (19%) Over £12,500-£14,549
Scottish basic rate (20%) Over £14,549-£24,944
Intermediate rate (21%) Over £24,944-£43,430
Higher rate (41%) Over £43,430-£150,000
Additional rate (46%) Over £150,000
For the rest of the UK – the tax bands are as follows:
UK basic rate (20%) Over £12,500-£50,000
Higher rate (40%) Over £50,000-£150,000
Additional rate (45%) Over £150,000
2. National minimum and living wage
In April each year, we have the annual increase of the National Living Wage and the other age-associated minimum wages. Don’t be caught out though – it is the pay week that determines the rate of pay not when the employee worked, this can confuse employers who operate a ‘lie week’.
As of April 1st 2019 the following minimum salaries apply:
>25 £8.21
21-24 £7.70
18-20 £6.15
>18 £4.35
Apprentice £3.90
3. Personal Allowance and tax codes
The good news is that your tax free personal allowance for the year 2019/2020 has increased by £650 and you can now earn £12,500 before paying any tax (assuming you are on the basic Scottish or UK tax code), this is crucial to know when filling in your self-assessment assessment form.
It is your responsibility to check that you are on the correct tax code. With the personal allowance having been increased to £12,500, depending on your working circumstances, you should either have a 1250L or S1250L code if you are resident in Scotland and being taxed on the basic rate. If your circumstances are slightly more complicated, for instance you receive a company car or a pension then you will most likely have a different tax code but the new personal allowance will have been taken into account.
Your business and/or payroll provider will be sent a new tax code for you, if applicable, so that they can update their payroll system or if you are self-employed, you will need this for your self-assessment tax return so when HMRC send you it through the post make sure your keep it safe!
4. Salary considerations for Limited company directors
With the personal allowance now at £12,500, you can earn up to £1,041.66 tax free per month. The threshold for National Insurance contributions is now at £8,632, which means that as an employee, you can earn up to £719.33 per month and not incur any national insurance liability.
5. Pensions Contribution Rates Increase
From the 6th April 2019, the minimum pension contribution is 8% and at least 3% of this should be contributed by the employer. Therefore, most companies will operate a 3% employer and 5% employee contribution payment arrangement.
6. Paying PAYE and NI Contributions in the 2019/2020 tax year
All payments to HMRC must arrive by the 22nd of the month following. You will need your 13-character Accounts Office Reference (e.g. 123PA01234567) followed by the 4-digit code of the tax month you are paying. This will be in the form of 20XX, 20 denotes the 2019/2020 tax year and then followed by the month number (April being the first month of the tax year).
2001 April 2007 October
2002 May 2008 November
2003 June 2009 December
2004 July 2010 January
2005 August 2011 February
2006 September 2012 March
If you would like to know more about these changes then please get in touch with Rebus Bookkeeping and Accountancy on 07720 910 886.
