The Personal Allowance, the amount you can earn before paying Income Tax, has increased to £12,500 p.a. (from £11,850 p.a.). This will mean a small reduction in tax of £130 a year for most people. The threshold for paying the Higher Rate of income tax (40%) has also increased to £50,000 (from £46,350). This amount includes the increased Personal Allowance.
There is no change to dividend tax rates in the 2019/20 tax year. The tax-free dividend allowance is £2,000, Basic-rate taxpayers pay 7.5% on dividends, Higher-rate taxpayers pay 32.5% on dividends, and Additional-rate taxpayers pay 38.1% on dividends.
If you are a company Director it is clear that, with a little bit of planning, there are some real opportunities to keep your income tax and National Insurance contributions under control. For example, paying yourself a salary of £8,632 (the secondary threshold for National Insurance contributions has increased £8,424 to £8,632) would be very efficient as you’ll pay employer NICs of 13.8 per cent on annual salary payments above this threshold.
Then paying yourself in dividends of up to £41,368, making a total of £50,000, would also be efficient as you would only pay tax on these dividends at 7.5% and no NI. We’ll leave you to work out just how efficient such an approach would be.
Scottish tax rates are slightly different with the basic rate being between 19 and 21%, the higher rate being 41% and the additional rate being 46%.
The Dividend Allowance for the 2019/20 tax year remains at £2,000. However, as outlined above the increased tax thresholds mean that you can take more in dividends before paying the higher dividend tax rate.
Whilst not strictly a tax year change, National Minimum Wage and ‘National Living Wage’ amounts increased from 1 April 2019. The minimum hourly rate that your staff are entitled to depends on their age and whether they are an apprentice, as below.
25 years +
21 to 24 years
18 to 20 years
Under 18 years
1 April 2019
From 6 April 2019, benefit in kind (BiK) tax rates have increased for company cars. The percentage applied to the list price of the car has increased based on the CO2 emissions published by the Vehicle Certification Agency. HMRC has published an on-line ready reckoner you can use to calculate your company car tax.
The tax-free amount you can pay into a personal pension remains at £40,000 per tax year. The lifetime allowance for pension savings has increased though to £1,055,000 (from £1,030,000)
The Capital Gains Tax annual exempt amount for individuals has increased to £12,000 (from £11,700).
Corporation Tax payable on business profits remains at 19%. The government is planning to reduce this further to 17% for the 2020/21 tax year (on 6 April 2020).
The minimum amount you need to pay into your employee’s auto-enrolment workplace pension has increased as of 6 April 2019. This means the total amount of employer and employee contributions must be a minimum of 8% of your employee’s qualifying earnings.
Total minimum contribution
Employer minimum contribution
Staff contribute the remainder
Up to 3%
6 April 2019
Up to 5%
Triennial reviews of auto-enrolment workplace pensions are taking place throughout the coming tax years on a rolling basis. If you set up your scheme in the 2016/2017 tax year, you will be required to complete a full triennial review of your scheme by The Pensions Regulator in the coming year. Click here for further details. There are significant fines for those not completing the review on time, or those who have not complied with the auto enrolment legislation correctly to date.
Let’s be honest, no one really enjoys even thinking about payroll, pensions or tax, let alone completing pay runs, self-assessments, pension contributions and other business returns. It can be a painful, drawn-out process which usually isn’t your area of expertise so why not unload some of the more boring bits to an FSB service provider. That’s what they are here for, one of the key benefits of being an FSB member, so let them take the strain.
FSB Workplace Pensions offer a service which will accurately calculate pension contributions as just another part of payroll, using deceptively simple payroll software which fully incorporates workplace pension calculations, at no additional cost. It creates accurate records of contributions made, documentation issued and provides prompts when employee circumstances change. This system, and the dedicated support team (it’s a service, not just software), will ensure you don’t become another statistic for HMRC or The Pensions Regulator.
The fees for the Pensions and Payroll solution are just £5 +vat per pay-slip, including all Workplace Pensions calculations and paperwork. A monthly paid workforce of four would cost just £20 +vat to administer, both payroll and pensions, a much lower cost than having an administrator in the office.
Happy with your current payroll provider? No problem. FSB Workplace Pensions offer their Premier Pension Service which provides ongoing management of your Workplace pension (£12.50 +vat p.m., up to 10 employees).
Their Triennial review service is also available for a one-off fee of £99 +vat. The Triennial review service is a part of both the Payroll and Pensions Solution and The Premier Pensions Service at no extra cost.
Make your New (Tax) Year’s resolution to offload your pension and payroll burden to FSB Workplace Pensions, and get back to spending your time doing what you do best; running your business.
With expert advice and guidance from a leading provider, it's one of the most popular FSB Member Benefits.