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TAX TIP TUESDAY: 5 Key Facts for The 19/20 Year

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. 

It’s easy to forget that with each new tax year, there are new laws and allowances to work toward. It’s not always doom and gloom with taxes though. While it’s not all positive, there is a lot of good news on the tax front.

Here are 5 key facts about tax this financial year.

1. Allowance increases

This year, the personal allowance is increasing to £12,500 and the higher rate threshold rises to £50,000 everywhere except Scotland, meaning you can earn more before you start paying tax on earnings.

The lifetime allowance also rises this year to £1.055m, a small increase of £25,000, which will help incrementally toward retirement goals.

While not a massive climb, Junior ISAs are also increasing by £108/year to £4,368.

2. It pays to get hitched

The benefits of marriage just keep on coming! If you make less than £50,000 and your partner earns under £12,500 (making them exempt from paying tax) then you can transfer 10% of your personal allowance to your spouse or civil partner with marriage allowance.

For the current tax year, the amount has increased to £1,250. And once you apply for the allowance, HMRC will continue to allocate the 10% each year unless told otherwise

3. Main residence nil rate tax band rising

This year, the main residence nil rate tax band increases 20% to £150,000 (assuming your entire estate’s net value does not surpass £2m.).

For most people, this will be an extraordinary help as most of their wealth comes from their home and they often don’t take advantage of the nil rate band.

Don’t forget to utilise the full £3,000 of your simple annual gift allowance as well. This is one of the allowances that can be carried over from year to year, so if you neglected to use your full allowance last year, you can roll it forward and increase it by the unused amount.

4. Capital Gains Tax (CGT)

For the 2019/20 tax year, the CGT allowance is £12,000 per individual, so £24,000 per couple. Assets can be transferred (outright and unconditionally) between spouses on what is referred to as a no-gain/no-loss basis.

This means that both you and your spouse can make use of exemptions and basic rate bands or you can offset one of your losses against the other’s gain. This is one of the allowances that needs to be fully utilised each tax year, so don’t forgot to use it to its full potential!

5. Yet another blow for buy-to-let

Unfortunately, it’s not all good news.

This tax year, the previously announced reductions in tax efficiency for buy-to-let mortgage interest changes take effect. Moving forward, only 25% of interest will earn full tax relief, leaving the rest with just a 20% tax credit.

Between this news and the continued pressure on buy-to-let investments, landlords and property investors are really feeling the heat.

What’s ahead?

With a new prime minister set to take over soon, we will be keeping a close eye on the next budget to see what changes are made.

Meet with your financial advisor

As we’re a few months into the new tax year, be sure you meet with your financial advisor to quickly take advantage of the increased allowances and changing tax rules. We’re happy to help you save on tax any time of the year. Contact us to book an appointment.

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