New Tax Year
The 2019/20 tax year started on the 6th of April and there are a quite few changes that have been implemented. In general, because of increases in allowances, taxpayers will be left with more money after tax, but there are a few people for whom the changes aren’t as positive.
There are five main areas that were affected the most by the new tax regulations. The first one is income tax. There are some positive changes for taxpayers that have been implemented in the new tax year, with the tax-free personal allowance increasing to £12,500 from £11,850, the higher-rate tax band increasing to £50,000 in England, Wales, and Northern Ireland, and the National Insurance upper earnings limit increasing to £50,000.
Inheritance tax has also been altered, with the Residence Nill Rate Band increasing to £150,000. This means that the combined tax-free allowance is now £475,000, making it £950,000 for a married couple.
Pensions have also seen some changes. The State Pension has been increased by 2.6% and the minimum contributions under the Government’s auto enrolment scheme have also increased to 8%. The pension lifetime allowance has also increased to £1,055,000 on pension contributions, in line with CPI inflation. Anything above this level can be taxed at 55% upon withdrawal.
Things have changed for investors also, with the Junior Individual Savings Account limit increasing to £4,368 and the Capital Gains Tax annual exemption increasing to £12,000. For people selling their second home, including buy-to-let landlords, Capital Gains Tax will be at 18% if they are basic rate taxpayers, or 28% if they are higher or additional taxpayers. Tax breaks are now available for people selling shares in unlisted companies and for people selling shares in unlisted firms, if conditions are met. The former is aimed at company directors, the latter to encourage outside investment in firms.
The next stage of phased removal of mortgage interest has also come into effect. Buy-to-let landlords are now only able to claim a quarter of the interest paid on their mortgages as a business expense to reduce their tax bill. This is in advance of the complete removal of the relief in the next tax year.
Inheritance Tax is not something that affect just the extremely wealthy anymore, but there are a few ways in which you can mitigate the amount of Inheritance Tax your next of kin will face.
- Make a will
By making a will you can make sure you are making the most out of the Tax exemption that allows you to pass your estate onto your spouse or civil partner.
- Make lifetime gifts
Gifts made more than seven years before the donor dies are free of Inheritance Tax. The gift can be as much as you want, but keep in mind that you need to live for seven years after making the gift for it to be exempt from Inheritance Tax.
- Leave a proportion to a charity
If you leave at least 10% of your estate to one or more charities your Inheritance Tax is reduced to 36% from 40%.
- Set up a trust
Trusts can be a useful way for a donor to remain in control of the gift even long after death; a direct gift offers no such control. A trust is a legal arrangement, and trustees will be responsible for managing the assets on behalf of and in the best interest of the beneficiaries.
Tracing a Lost Pension
The UK’s lost pensions mountain is enormous: around 800,000 pensions, worth an estimated £9.7 billion are unclaimed, and this figure does not even hold into account the lost pensions in the public sector, or with trust-based schemes run by employers. Changing work patterns means the number of people with multiple pensions is ever increasing, making it more and more important to keep track of your pension paperwork. If you do have a lost track of a pension, you should write down the dates and contact details of the companies you had pensions with. You can also contact the Pension Tracing Service, who will then help you find the addresses and details you need and can help you locate or trace any lost pensions. You can also contact the Pension Tracing Service to track down any unclaimed pensions for deceases relatives, as their estate or a surviving partner/relative might be eligible to claim a percentage.
For further and more detailed information, please refer to the IntuitiveFS SmartMoney May/June 2019 newsletter.
If you are looking for any tax-related or financial advice, contact our experienced in-house financial advisors Intuitive Financial Services. Director Louise O’Reilly can be contacted on 07876 755717 or via email on firstname.lastname@example.org
Source: IntuitiveFS SmartMoney May/June 2019