You will know that Tax year 2019/2020 begins on 6 April (a month away) – but are you aware that new tax rates will also be coming into play?
There will be changes to Car benefits, National Insurance Contributions, but perhaps most importantly the rates of Income Tax are set to change. You may be worried that you might have to start paying more tax after April, but fear not – it is predicted that about 32 million people will be paying less income tax in 2019 as reported by Full Fact.
Am I one of these people?
Whether you will be paying less tax this year depends on your Taxable Income (your annual income). Have a look at this table to see how the tax rates for 2019/2020 will compare to the current tax rate:
If your income is between £11,851 and £12,500 per annum you no longer have to worry about paying the 20% tax rate as you only start paying 20% when you’re earning £12,501. The same applies for if your income is between £46,351 and £50,000 – you will be paying 20% rather than 40%.
How much tax am I paying right now?
Let’s say your yearly income is £25,000 (after other expenses such as National Insurance etc have been deducted).
As you earn over £11,851 the current tax rate you pay is 20%. The first £11,851 is tax-free, so the taxable amount is 25,000 – 11,851 = £13,149.
So your current tax liability is 20% of £13,149 = £2,629.80. You are paying £2,629.80 currently in tax.
How much tax will I be paying in 2019/2020?
As the new threshold for paying 20% is £12,501 and you earn £25,000, the taxable amount will be 25,000 – 12,501 = £12,499.
20% of 12,499 = 2,499.80.
£2,629.80 (the current amount you pay) minus £2,499.80 (the amount you will be paying) = £130.00.
So overall you will be saving £130 a year – and this is the same if you’re earning any other amount of income which falls under the 20% tax rate.
If you want more advice on income tax and the changing tax rates, don’t hesitate to drop J&P Accountants a line – send us a message today or call us.
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