Your guide to the new tax year 2019/2020
Published 15 April 2019
Could you have an extra £650 in your pocket? See if you’ll be better off as we walk you through what’s changed this tax year.
We left the tax year behind on 6th April and a few changes have been made by the government for this tax year.
If you read our blog post about the 2018 budget, you might have an idea of what’s in store.
Don’t worry if you haven’t, because we’ve put together an easy guide to show you how these changes might affect you.
You’ll be happy to hear that most us will be a bit better off. It’s great news if you’re looking to retire, working at minimum wage or are close to a tax bracket.
However, it’s not all sunshine and rainbows. If you’ve got a car you might see a hike in your tax payments, as some of us could be paying an extra £65 a year!
Here’s what’s new for 2019/2020:
£650 in your wallet, not Theresa May’s
Your personal allowance is the amount that you can earn without needing to pay tax.
In 2018/2019 this was £11,850 but it’s now gone up to £12,500. This means that in this tax year you can earn an extra £650 tax-free!
If you’re close to the threshold of the higher tax rate, there’s good news for you too. This is increasing to £50,000 from £46,350, so you get to keep hold of a bit more of your money.
More, more, more minimum wage
With the cost of living going up, it seems only fair that the government have decided to raise the National Living Wage to match it.
If you’re 25 and over, the living wage has risen by 38p to £8.21 per hour. It might not sound like a lot, but if you work 16 hours a week that’s around an extra £316.16 per year!
Those aged 21 to 24 will now get a minimum wage of £7.70 instead of £7.38, and if you’re between 18 and 20, minimum wage will be £6.15.
A little extra in your pension pot
Retirement should be a time where you relax after all your hard work, not spent worrying about your pension.
In the words of a very famous supermarket, “every little helps”, and in this tax year you’ll receive an additional £3.25 per week if you retired before 6th April 2016 and have a state pension.
If you haven’t retired just yet or retired after that date, then you’ll be on the newer ‘single-tier’ pension. This means you’ll be getting £168.60 a week, £4.25 more than what you would have got last tax year.
Workplace pension schemes haven’t been left out either. If you’re enrolled in a scheme you’ll see the minimum contribution rise from 5% to 8%, with minimum that your employer needs to contribute now set at 3%.
This means that if your employer puts in 3%, the other 5% is contributed by you, the employee. If you’re really lucky, your employer might pay the whole 8%, meaning you don’t have to pay a thing.
Graduates can earn more before loan repayments start, no need for Mrs Robinson
Whether you’ve graduated already or are thinking about going to uni, there will come a time when you need to start paying back your loan.
To take the pressure off a bit, the government has put up the minimum amount you have to earn before you start making repayments if you started your course after 1st September 2012.
If you’re a student from England, Wales or you had EU funding, you don’t need to start paying back your loan until you earn £25,725 a year.
Graduates from Scotland or Northern Ireland will need to earn £18,930 before loan repayments start, £600 more than in the last tax year.
You might find that your car tax IS taxing
For most drivers, the annual cost of your car tax will go up by a fiver. This is due to your tax being linked to the CO2 emissions of your car, how old your car is and inflation.
If you’ve got a car that’s particularly polluting you might be hit with charges of an extra £65 a year. The rule is there to encourage people to choose more environmentally friendly cars, as the greener your car the less tax you’ll pay.
One exception to this rule is electric cars. If you’ve got one of these, you don’t have to pay any car tax.
Want help budgeting for the tax changes? There’s an app for that!
The thinkmoney app is here to help you plan for any changes you might want to make to your spending habits to bring in the new tax year.
You can keep money aside to pay your car tax on time without worrying, while you use those extra pennies you’re entitled to on a day out with the family.
If you want to find out more, have a look at our recent blog post.