What Are The Income Tax Brackets For 2019?

Every year, the government announces new financial plans in their Autumn Budget. In 2018, arguably the most significant changes to occur were the increase in the tax-free Personal Allowance threshold, the increase in the higher rate Income Tax threshold and changes to the National Insurance lower and higher earnings limits.

Effectively, as a result of the changes to Income Tax rates, a large portion of the population would now be entitled to a boost affecting the tax they pay.

To help you get to grips with what could have resulted in a significant change to your take-home pay, we’ve provided this guide on tax brackets for 2019/20.

An introduction to Income Tax

Income Tax is (as you would imagine) the tax you pay on income. It does not include all form of earnings, however; you generally pay tax on the following income once it has exceeded your Personal Allowance:

  • Wages
  • Profit from self-employment
  • Pensions
  • Rental income
  • Trust income
  • Interest on savings

Your Personal Allowance is the amount the government permits you to earn without paying tax on it. Currently, the standard for Personal Allowance is £12,500. This can vary should you claim Marriage or Blind Person’s Allowance, but it typically covers the majority of taxpayers.

Tax brackets for 2019/20 are determined by taxable income. Specifically, taxable income is your gross income (income from all sources before tax) minus any deductions (including benefit or pension scheme contributions) and minus your Personal Allowance.

What are the UK income tax rates and brackets for 2019/20?

The updated tax brackets for 2019/20 are as follows:

BandTaxable income    Tax rate
Personal Allowance   Up to £12,5000%
Basic rate £12,501 to £50,000 20%
Higher rate£50,001 to £150,000 40%
Additional rateOver £150,00045%

In other words, you will now need to earn a minimum of £12,500 before paying Income Tax in the UK. This has increased from £11,850 in 2018/19. Additionally, the basic tax rate band was extended from £46,350 to £50,000.

Please bear in mind that Scotland sets its own thresholds for Income Tax rates and they do not apply to the rest of the UK. In Scotland, the Income Tax 2019 bands are as follows:

Band Taxable incomeTax rate
Personal AllowanceUp to £12,5000%
Starter rate£12,501 to £14,54919%
Basic rate£14,550 to £24,94420%
Intermediate rate£24,945 to £43,43021%
Higher rate£43,431 to £150,00041%
Top rateOver £150,00046%

Savings income 

It may come as a surprise to discover that your savings can produce taxable interest. While most people may never be taxed on their interest, we nevertheless thought it would be useful to demonstrate the changes in light of the tax brackets for 2019/20 and how they could impact your savings income.

All taxpayers have an allowance before paying tax on savings interest. This is made up of:

Personal Allowances – The £12,500 you’re entitled to earn prior to being taxed can be used to prevent savings interest from being taxed.

Your starting rate for savings – You can claim up to £5,000 of interest tax-free. However, this is affected by earnings from other income such as wages and pensions. For example, if your wages or pension exceed £17,500, you aren’t entitled to the maximum £5,000.

Personal Savings Allowance – Depending on your tax bracket, you’re entitled to a certain level of savings interest tax-free. For those on the recently changed basic rate, you can receive up to £1,000 of interest tax-free. Those in the higher rate band will receive £500 and the additional rate earners will receive £0.

Personal Savings Allowances cover savings within your bank or building society. Coupons from fixed-interest securities and any trust funds that you may receive additional income from are also protected. 

Non-savings income

Of course, non-savings income is more likely to affect your tax band. Whether that’s dividends you receive, pensions or salaried wages, these sources of earnings are what form the bulk of your 2019/20 Income Tax.

What’s important is that taxpayers firmly understand which tax band they fall into, in order to avoid being incorrectly taxed. Simply put, you should deduct all of the allowances mentioned above from your total earnings (savings and non-savings) in order to determine your final, taxable income.

Once you’ve identified said income, you can better trace the impact from the changes to Income Tax in 2019/20. It’s even possible you may now be in an entirely new band, impacting your overall take-home pay.                                 

Here’s where GoSimpleTax comes in. For taxpayers uncertain of changing responsibilities and tax commitments, our cloud-based software supports your journey into compliancy. We understand that every tax year presents new challenges, and our software is designed to help you every step of the way – logging income and expenditure and automatically calculating the amount of tax due.

If you’d be interested in using software that presents opportunities to potentially reduce tax liability, while staying abreast of all changing legislation, get started with GoSimpleTax today.

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