Income tax: Rates and thresholds: tax year 2019 to 2020
The Government will legislate in Finance Bill 2018-19 to set the charge for income tax, and the corresponding rates, as it does every year. Finance Bill 2018-19 will set:
- The main rates, which will apply to non-savings, non-dividend income of taxpayers in England, Wales and Northern Ireland;
- The savings rates, which will apply to savings income of all UK taxpayers;
- The default rates, which will apply to a very limited category of income taxpayers that will not fall within the above two groups, made up primarily of trustees and non-residents;
Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament. From April 2019 the Welsh Government will set a Welsh rate of income tax for non-savings, non-dividend income for Welsh taxpayers.
Personal allowance and higher rate threshold
The Government will legislate in Finance Bill 2018-19 to increase the personal allowance to £12,500 for 2019- 20. The basic rate limit will be increased to £37,500 for 2019-20. The Government also set the personal allowance at £12,500 and basic rate limit at £37,500 for 2020-21, bringing forward the government’s manifesto commitment to raise the personal allowance and higher rate threshold to these amounts by one year. For future years, increases to the personal allowance and basic rate limit will be indexed with the consumer prices index (CPI). Changes to the basic rate limit, and higher rate threshold, will apply to England, Wales and Northern Ireland, and to savings and dividends income in the UK. Income tax rates and thresholds on non-savings, non-dividend income for Scottish taxpayers are set by the Scottish Parliament. Changes to the personal allowance will apply to the whole of the UK.
Tax treatment of social security benefits
The Chancellor announced that the Government will legislate in Finance Bill 2018-19 to confirm the income tax treatment of nine new and existing social security benefits. The legislation will confirm that the following eight benefits are exempt from income tax: Young Carer Grant, Best Start Grant, Funeral Expense Assistance and Discretionary Housing Payment (introduced by the Scottish government); Discretionary Support Scheme (overseen by the Northern Ireland Executive); and, Council Tax Reduction Scheme, Discretionary Housing Payment and the Flexible Support Fund (overseen by the UK government). The legislation will confirm the Carer’s Allowance Supplement in Scotland is subject to income tax in accordance with the 2016 agreement between the Scottish Government and the UK Government on the Scottish Government’s Fiscal Framework.
The changes will have effect on and after Royal Assent to Finance Bill 2018-19.
Van and fuel benefit charges for cars and vans from 6 April 2019
The Government will increase the car and van fuel benefit charges by the September 2018 RPI. The van benefit charge will increase by the September 2018 CPI. These changes will have effect on and after 6 April 2019. The Government will legislate by Statutory Instrument shortly after the publication of Finance Bill 2018-19 to ensure the changes are reflected in tax codes for 2019-2020.
Legislating the existing tax treatment of expenses for unpaid officeholders
The Chancellor announced at Budget 2018 that the Government will legislate in Finance Bill 2019-20 so that expenses paid or reimbursed to unpaid officeholders are exempt from income tax when incurred because of their voluntary duties. This places the existing concessionary treatment on to a statutory basis, providing certainty for those organisations engaging unpaid office-holders. Corresponding legislation will also be introduced to mirror the income tax exemption for National Insurance contributions. The change will have effect on and after Royal Assent to Finance Bill 2019-20.
Shared occupancy test for rent-a-room relief
Following consultation on draft legislation, to maintain the simplicity of the system, the Government has announced that it will not include legislation for the ‘shared occupancy test’ in Finance Bill 2018-19.
Employment Allowance reform
The Chancellor announced that the Government will legislate to restrict access to the National Insurance contributions (NICs) Employment Allowance to employers with an employer NICs liability below £100,000 in their previous tax year. Where employers are connected under the Employment Allowance rules the threshold will apply to their aggregated liability. This change will take effect from 2020-21.
Address non-compliance with the off-payroll working rules
As announced at Budget 2018, the Government will legislate in Finance Bill 2019-20 to reform the off-payroll rules in the private sector. Responsibility for operating the existing off-payroll working rules, and deducting any tax and NICs due, will move from individuals to the organisation, agency or other third party paying an individual’s personal service company. Small organisations will be exempt and this change will bring private sector organisations in line with public sector bodies and agencies. The change will come into effect from 6 April 2020.
Delay to National Insurance Contributions Reforms of Termination Payments and income from sporting testimonials
As announced at Budget 2018, the Government will not abolish Class 2 NICs during this Parliament. There are two remaining measures in the draft NICs Bill published on 5 December 2016: reforms to the NICs treatment of termination payments and income from sporting testimonials. The government still intends to legislate for these reforms, which will take effect from April 2020.
Response to the consultation on taxation of self-funded work-related training costs
Following consultation responses indicating that tax relief is unlikely to be effective in addressing the barriers to learning or incentivising training, the government is maintaining the scope of tax relief currently available to employees and the self-employed for work-related training costs. The consultation response document has been published alongside Budget 2018. Tax and administrative treatment of short-term business visitors It was announced at Budget 2018 that the Government will introduce secondary legislation to amend the Income Tax (Pay As You Earn) Regulations 2003, extending the Pay As You Earn (PAYE) reporting and payment deadlines to 31 May for companies using the PAYE special arrangement for Short Term Business Visitors. The PAYE special arrangement limit for UK workdays in the tax year will be extended from 30 days or less to 60 days or less. These changes follow the consultation which closed on 6 August 2018. The changes will have effect from 6 April 2020.
Offshore receipts from intangible property
This measure will apply a UK income tax charge to the proportion of a foreign resident entity’s intangible property income that is referable to the sale of goods or services in the UK. It will apply in relation to entities located in jurisdictions with whom the UK does not have a full tax treaty (one containing a non-discrimination clause) and in relation to payments made via both related and unrelated parties
It should apply, for example, where a non-UK entity receives income from the sale of goods or services in the UK, and where that entity makes a payment to the holder of intangible property in a low tax jurisdiction, in which case an income tax charge will arise to the extent that the income receivable in the low tax jurisdiction is referable to the sale of goods or services in the UK.
Income tax will be charged on the gross income referable to the sale of goods or services in the UK and realised by the non-UK resident entity from the ownership, or rights over, relevant intangible property.
The measure will:
- include joint and several provisions to enable the collection of the debt from connected parties in the event of non-payment by the non-UK resident entity;
- include a £10 million de minimis UK sales threshold;
- exclude income from charge where the tax payable by the foreign entity in relation to income referable to the sale of goods or services in the UK is at least 50% of the UK income tax charge that would otherwise arise;
- include an exemption for income arising in entities that have not acquired their intangible property from related parties and where all, or substantially all, of the trading activities have always been undertaken in the low tax jurisdiction;
- a targeted anti-abuse rule, effective from 29 October 2018, to protect against arrangements designed to avoid the charge, including arrangements which involve transferring the ownership of intangible property to another group entity resident in a full treaty jurisdiction. The measures will otherwise be effective from 6 April 2019.
If you need assistance with any tax related issues, we operate as tax advisors to many self-employed people and small business owners, so please contact us for an initial discussion.