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TAX TIP TUESDAY: New Tax Year – Rates To Know

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 


There are only two certainties in life: death and taxes. And each year in April, the tax year resets, along with your allowances. You may think you have a handle on everything, but often each year you’ll have to contend with new regulations, rates, and thresholds. The 2019/20 tax year is no exception.


2019/20 tax year – what’s new?

Now that the new tax year has officially begun, it’s time to take a look at the changes you’ll need to adapt to concerning income tax rates and thresholds, and pensions.

Income tax

Designed to curb the effects of inflation, there are two new income tax adjustments.

  • The personal allowance will increase by 5.5% (£650) to £12,500
  • The higher rate tax threshold will increase by 7.9% (£3,650) to an even £50,000
  • However, in Scotland, the higher rate threshold will remain at £43,430.

These thresholds will hold in the 2020/21 tax year, so any benefit may only be seen this tax year should inflation continue to outpace government changes.


National Insurance Contributions

The full impact of this change also affects National Insurance Contributions (NICs).

The upper earnings limit for paying the standard 12% NIC rate will also climb to £50,000 (outside Scotland) for both employed and self-employed persons. The rate paid on earnings above this amount is 2%. This will obviously help to recoup some of the income tax savings lost by the government.

For those in Scotland, it means that those earning between £43,430 and £50,000 will be affected by income tax (41%) plus NICs rates (12% for employees) of up to 53%.


Pensions

Also increasing to £50,000 this year is the threshold for automatic enrolment pension contributions. Coupled with the fact that the minimum overall contribution rate is increasing from 5% to 8%, many employees could see their net contributions grow by two thirds. If the changes to the higher rate threshold will now take you out of your tax band, you could be looking at more than double the amount of contributions you previously made.

Pensions haven’t escaped some changes either. There has been a minor increase in the lifetime allowance of £25,000, bringing the new maximum value of pension benefits to £1.055 million.


Brush up on your tax obligations and allowances

If you have any questions about how these new tax rates and pension thresholds will affect your finances in the upcoming tax year, get in touch with one of our financial experts today.


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