Personal tax rates

Personal Allowances and rates


 2018/19 2019/20
Personal Allowance – The amount of tax-free income you have each tax year £11,850 £12,500
Income limit for Personal Allowance –The level of earnings at which the Personal Allowance reduces. For each £2 in earnings above £100,000, you lose £1 of Personal Allowance.


In 2019/20, you don’t receive any personal allowance when you earn over £125,000 (2018/19 equivalent is £123,700).

 £100,000 £100,000

 

Income Tax rates

Note: The amounts below assume the full Personal Allowance is used by the individual.


 2018/191 2019/201
Basic rate – The lowest level of income tax paid above the personal allowance. 20% on earnings between £11851 and £46,3501 (you pay tax on £34,500) 20% on earnings between £12,501 and £50,0001 (you pay tax on £37,500)
Higher rate – The middle tier of income tax. 40% on earnings between £46,351 and £150,0001 40% on earnings between £50,001 and £150,0001
Additional rate – The top rate of income tax for high earners. 45% on earnings above £150,0001 45% on earnings above £150,0001

1for 2018/19 and 2019/20, there are different income tax rates for Scottish residents  

Scottish Income Tax Rates and Thresholds and changes for 2019/20

 


 2018/19 tax year 2019/20 tax year
Band name Tax Rate Bands and Thresholds*
Starter rate 19% £11,850 – £13,850 £12,500* – £14,549
Basic rate 20% £13,851 – £24,000 £14,550 – £24,944
Intermediate 21% £24,001 – £44,273 £24,945 – £43,430
Higher rate 41% £44,274 – £150,000 £43,431 – £150,000
Additional rate 46% Over £150,000 Over £150,000

*Personal Allowance: The above table assumes the individual is receiving the Personal Allowance for tax-free income of £12,500 for the 2019/20 tax year (Or £11,850 in the 2018/19 tax year). The Personal Allowance is reduced by £1 for every £2 earned over £100,000. This is the same as the rest of the UK.

 

Dividend tax rates

There is no change to dividend tax rates in 2019/20:

  • The tax-free dividend allowance is £2,000
  • Basic-rate taxpayers pay 7.5% on dividends
  • Higher-rate taxpayers pay 32.5% on dividends
  • Additional-rate taxpayers pay 38.1% on dividends.

 

National Insurance

National Insurance bands and rates are some of the most confusing around – not least because things are different for employees, sole traders and limited company directors. National Insurance Contributions (NICs) are usually calculated weekly, rather than annually. We’ve included both here.

 

Employee National Insurance contributions


 2018/19 2019/20

Weekly Annually Weekly Annually
Lower Earnings Limit – Earnings below this limit will incur no NICs £116 £6,032 £118 £6,136
Primary Threshold – Earnings below this limit will incur no NICs £162 £8,424 £166 £8,632
Upper Earnings Limit – Earnings above the Primary Threshold and below the Upper Earnings Limit will be taxed at 12%. £892 £46,350 £962 £50,000
Any earnings above the Upper Earnings Limit are taxed at 2%

 

Employer National Insurance contributions


 2018/19 2019/20

Weekly Annually Weekly Annually
Secondary Threshold – Salary payments above this threshold will incur Employer NICs at 13.8%. £162 £8,424 £166 £8,632

 

Self-employed National Insurance contributions


 2018/19 2019/20
Small profits threshold – Earnings below this threshold incur no NICs. £6,205 £6,365
Class 2 NICs – for those earning above the Small profits threshold £2.95 per week £3.00 per week
Lower Profits Limit – Earnings up to this limit incur only Class 2 NICs. Over this limit incurs Class 4 NICs. £8,424 £8,632
Upper Profits Limit – Earnings up to this limit incur:


  • Class 2 NICs
  • Class 4 NICs at 9% of the profit between the Lower Profits Limit and Upper Profits Limit.
 £46,350 £50,000
Earnings above the Upper Profits Limit


Any earnings above this limit incur:

  • Class 2 NICs
  • Class 4 NICs at 9% of the profit between the Lower Profits Limit and Upper Profits Limit
  • Class 4 NICs at 2% of the profit above the Upper Profits Limit.
 Over £46,350 Over £50,000

 

Capital Gains Tax

Capital Gains Tax is a tax on the profit made when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive. The tax rate you use depends on the total amount of your taxable income.


 2018/19 2019/20
Annual exemption from capital gains £11,700 £12,000
As a basic rate taxpayer Gains from other residential property 18% 18%
Gains from other chargeable assets 10% 10%
As a higher rate taxpayer Gains from other residential property 28% 28%
Gains from other chargeable assets 20% 20%
Entrepreneurs’ Relief (the lifetime limit on relief is £10 million) 10% 10%

 

Company tax rates

Corporation Tax

The Corporation Tax rate remains at 19% for the 2019/20 tax year. The government plans to reduce the rate to 17% for the 2020/21 tax year.


 2018/19 2019/20
Corporation Tax rate 19% 19%

 

VAT Registration


 2018/19 2019/20
VAT Registration threshold – The level of revenue at which you must register for VAT £85,000 £85,000

 

General VAT rates


 2018/19 2019/20
Standard – The VAT rate applicable to most goods and services 20% 20%
Reduced rate – A lower rate applicable to certain goods and services 5% 5%
Zero rate – A rate applied to some goods and services (food, children’s clothes etc.).


Note: this is not the same as items which are exempt from VAT

 0% 0%

 

Flat Rate VAT scheme sector rates

If you decide to use the Flat Rate VAT scheme (available to those with revenue of £150,000 or less) you must choose a business sector and use the applicable rate for all transactions where VAT applies. If you are unsure which sector you fit into, speak to an accountant.

If turnover (inclusive of VAT) exceeds £230,000 per annul you can no longer use the Flat Rate scheme.

Remember if you’re a Limited Cost Trade you must use the 16.5% rate regardless of the business sector.

 

Mileage Allowances

HMRC’s approved mileage allowance payments (sometimes called AMAP) allow business mileage to be claimed as expenses at specific rates. The current rates are:


 First 10,000 miles Over 10,000 miles
Car / van £0.45 £0.25
Motorcycle £0.24 £0.24
Bicycle £0.20 £0.20

 

Director Loan Rate


 2018/19 and 2019/20
If loaned amount exceeds £10,000 at any point during the year 2.5% nominal interest on the whole amount plus Class 1A National Insurance contributions (13.8%), and may need to be reported on your P11D

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