It’s that time of year, summer has gone and the leaves are starting to fall from our trees, which means it’s time for the Chancellor’s annual budget.
The budget took place on Monday 29 October, and despite many expected (and unexpected) announcements, there were, however, three aspects that were relatively unusual.
- Firstly, it is earlier in the year than usual to avoid clashing with the final stage of Brexit negotiations in November.
- Secondly, the budget was presented on a Monday. It is normally revealed on a Wednesday after Prime Minister’s Questions. This year that would mean it would have fallen on Halloween, although the government denies that this was a factor in choosing the day.
- Thirdly, the Chancellor started his speech at approximately 3.30pm, three hours later than usual. That’s because Parliamentary business starts later on a Monday because MP’s have to travel to London from their constituencies.
During the budget speech, some people are on the edge of their seat, desperate to hear what is said and clinging on to every word to see how it may affect you, or were you one of the many others who just heard the figure of “£130 better off” for basic rate taxpayers?
To help you make sense of it all, and how the changes in tax may affect you, I’ve broken it down and simplified it all… So here you go…
Personal Tax Allowance & Income Tax bands
The personal Income Tax allowance will increase from April 2019 to £12,500, it’s currently £11,850. This means you can earn £12,500 per year before you start to pay tax. The Chancellor has increased it to this level sooner than he planned, BUT it will remain frozen for the next two years.
The Income Tax bands have also increased, meaning that you can now earn a whopping £50k before paying 40% tax.
The self-employed have to pay two types of National Insurance. Class 2 NI at a set rate & Class 4 NI based on how much they earn each year. During last year’s budget, the government announced that they were going to scrap Class 2 contributions. This never happened, and the government have decided not to go ahead with the original changes.
Tax on dividends
Dividends are payable to company shareholders. The first £2,000 of dividends are tax-free, this remains the same for the tax year 2019/20. Dividends over this amount are taxed at just 7.5% for basic rate taxpayers and are not subject to NI contributions. If you are currently self-employed, it could well benefit you to become a limited company, contact VW Taxation for details.
Corporation tax rates
Corporation tax rates remain unchanged at 19%. For those of you not yet working through a limited company, get in touch now!
Booze, fags & fuel
As normal, bad news for smokers, a packet of 20 cigarettes has gone up by 33p! But for those who enjoy a drink, they will be pleased to note there is no increase to the tax charged on beer & spirits. Fuel duty has remained frozen.
Having said all of the above, people across the country wait with bated breath on the outcome of the Brexit negotiations the Government are currently undertaking, as in the event of a No Deal Brexit, the Government will hold an emergency budget, which may throw a spanner in the works across every industry. Watch this space.
Got a concern or question about how the budget may affect you, get in touch today!