The personal tax rates for 2019/20 and 2018/19 are as follows:
| Notes | 2019/20 | 2018/19 | ||
| Personal Allowance(Excl Scotland) | 1 | £12,500 | £11,850 | |
| Blind person’s allowance | £2,450 | £2,390 | ||
| Basic Rate | 20% | 20% | ||
| Dividend ordinary rate | 7.5% | 7.5% | ||
| Starting rate for savers | 10% | 10% | ||
| Starting rate for savers limit | £5,000 | £5,000 | ||
| Higher rate on income over | £50,000 | £46,350 | ||
| Dividend upper rate | 32.5% | 32.5% | ||
| Additional rate on income over | £150,000 | £150,000 | ||
| Additional rate | 45% | 45% | ||
| Additional dividend rate | 37.5% | 37.5% | ||
| Dividend Allowance | £2000 | £2000 |
Notes
- Allowances are reduced by £1 for every £2 that net adjusted income exceeds £100,000.
Starting Rate for Savers
Your taxable savings income is regarded as the part of your taxable income and is taxed after your earned income (e.g. earnings from wages, pensions, self employed earnings etc). There is a 0% starting rate for savings income only. The 0% band is limited to £5,000 of taxable savings income. This means that, for the tax year 2019/20, you must earn less than £17,500 (£12,500 + £5,000) of earned and savings income combined in order to be able to take advantage of the starting rate for savers. For example if your earned income was £12,000 and your savings income was £3,000 (total income £15,000), you would pay no tax on the first £12,500 of total income, and the £2,500 of savings income that falls above the personal allowance would also be tax free. However if your earned income was £14,500 and your savings income was £4,000 (total income £18,500) you would pay basic rate tax (20%) on your earned income of £2,000 (£14,500 less £12,500), 0% on your savings income of £3,000 and basic rate tax on the remainder of your savings income of £1000.
Basic rate taxpayers can also get up to £1,000 of interest tax free and higher rate taxpayer’s £500 (additional rate taxpayer do not qualify for this allowance)
Marriage Allowance
Marriage allowance allows you to transfer £1,250 (2019/20) of your personal allowance to your husband, wife or civil partner if they earn more than you. You must earn less than £12,500 in order to be able to make the transfer. You can apply online at: https://www.gov.uk/apply-marriage-allowance
Self Employment and Property Rental Income Allowances
You can get up to £1,000 each tax year in tax free allowances for property or trading income. If you have both types of income you can get the allowance for each. If your income from these sources I less than £1,000 then you don’t have to tell HMRC about it, but you may still need to register for self assessment if you have trading income and you have made a loss that you wish to claim relief for, want to pay voluntary class 2 National Insurance contributions to help qualify for benefits or wish to claim either Tax Free Childcare or maternity allowance based on your self employment.If your income is more than £1,000 you can use the allowance to offset your income rather than deducting other expenses.
Dividend Rates
The first £2,000 of dividend income is not taxed. However if your other income is less than your personal allowance then any dividend income received that takes your total income up to the personal allowance is also tax free.
Trading Losses
If a person who carries on a business, wholly or partly in the UK, makes a loss from trading (trade losses), on the disposal of a capital asset, or within a property rental business, then they may be able to claim loss relief. Certain trade losses may be offset against general income or chargeable gains in the same year. It may also be possible to carry trade losses back to earlier years or forward to subsequent years. However, no loss relief can be claimed unless the trade, profession or vocation is commercial, that is, unless it is carried on throughout the basis period for the tax year on a commercial basis and with the view to the realisation of profits of the trade.
Where an individual makes a loss in a trade, or incurs a loss as a partner in a partnership trade, the tax rules allow the losses to be set against general income and, if applicable chargeable gains in the same or the previous year.
Where a claim is made to have the losses set against general income or chargeable gains of a particular tax year they have to be set as far as possible against that income or chargeable gains. In other words it is an ‘all or nothing’ claim and this may result in personal allowances or the annual exemption not being utilised. For this reason it is necessary to consider the extent to which capital allowances are claimed as it can be beneficial to defer a claim into a future year.
There are additional rules for losses incurred in the early years of a trade. The early years are considered to be the year in which the trade commences and the subsequent 3 years. The individual may claim that the loss is relieved as far as possible by reference to his or her total income for the year of assessment ending three years before the end of the year of loss, with any balance by reference to the total income of the next two succeeding years of assessment, the earlier year being taken in priority to the later.
Generally claims for loss relief against the current year or prior years income must be made within 12 months of 31 January following the end of the tax year in which the loss is made.
Losses can also be carried forward, but such a loss can only be set off against profits arising from the same trade, profession or vocation. Losses carried forward must be set off against the first year in which a profit arises and any balance must then be set off in the next year in which a profit arises.
No carry-forward is allowable unless the ownership and identity of the business during the tax years for which the allowance is claimed remain the same as during the period in which the loss was made.
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