Personal Tax Update


Peter Young

Peter Young

Tax Partner

29 October 2018


    The big headline in the Chancellor’s Budget from a personal tax perspective is the increase in the personal allowance and basic rate threshold to a combined figure of £50,000 from 6 April 2019 – a year earlier than originally planned.

    Personal allowance

    The personal allowance is set by the UK Government and will increase from the current £11,850 to £12,500 in 2019/20.  For a basic rate taxpayer this represents a potential tax saving of £130 per year and £260 for a higher rate taxpayer. The personal allowance is tapered where a person’s adjusted income exceeds £100,000 and so for many higher earners, this increase will not benefit them.

    Basic rate threshold

    The changes to the basic rate threshold from £34,500 to £37,500 from April 2019 will benefit UK taxpayers but potentially only some Scottish taxpayers. Tax rates and bands for earned income (e.g. employment, self employment pensions and rental income) lie with the Scottish Parliament and we shall await Derek Mackay’s Scottish Budget on 12 December with keen anticipation. In the past two years, the basic rate threshold has been increased more slowly as well as the introduction of a 19% starting rate and 21% intermediate rate.

    Class 2 National Insurance

    For the self-employed, the almost trivial Class 2 National Insurance Contributions now collected through Self Assessment are to remain until at least the end of this Parliament.  The current rate is £2.95 per week collecting the Treasury £153.40 per year for those eligible to pay it, which is cheap given the entitlement to state benefits it bestows upon the payer.

    Inheritance Tax and property

    There was little of consequence on Inheritance Tax announcements in the Budget and for those buying property, some relatively minor changes in SDLT affecting property purchases in England and Northern Ireland.  For those acquiring property in Scotland, we shall again need to await any proposals announced in the Scottish Budget on 12 December.

    Aside from this, the Budget is perhaps more memorable for what was not announced rather than what was particularly in the area of pensions. Successive chancellors have often tinkered with pension rules and this Chancellor had spoken about the “eye wateringly expensive” cost of pensions tax relief.  Many felt that this Budget would see further restrictions in tax relief, particularly for the better off.  In fact, no changes were announced other than the inflation linked increase to the pensions Lifetime Allowance from £1,030,000 to £1,055,000 in April 2019.

    We await Derek Mackay’s Scottish Budget announcement in December to gain a fuller picture on the impact to the Scottish taxpayer.