From April 6, 2019, a series of changes will come into force as the new tax year begins. Chancellor Philip Hammond announced in the 2018 budget he was bringing the increase to the tax-free personal allowance forward by one year. This is good news for working people across the UK, with more take-home pay before owing tax.
How much will personal tax allowances increase by?
The tax-free personal allowance will increase from £11,850 to £12,500 from April 6, 2019.
This means any wage you take home over £12,500 will be subject to tax – depending on the amount.
The basic rate limit will be increased to £37,500 for 2019 to 2020.
Also increasing is the higher-rate tax band, from £46,350 to £50,000 in England, Wales and Northern Ireland.
However, in Scotland, where income tax rates are devolved, the higher-rate tax band will remain at £43,430 which is £6,570 lower than the rest of the UK.
Also on the rise are national insurance contributions, which are increasing to 12 percent on money earned between £46,350 and £50,000.
Steven Cameron, pensions director at Aegon, told the Financial Times: “Someone earning £50,000 in England, Wales or Northern Ireland would pay £7,500 in income tax from the 2019-20 tax year, while someone earning the same figure in Scotland would pay £9,044, which is £1,544 a year more or £128 a month extra.
“To add insult to injury, Scots face a double whammy because, in line with the rest of the UK, they will pay national insurance at a rate of 12 per cent on earnings up to £50,000, before this reduces to 2 per cent on earnings above this level.”
Also changing on April 6 is the amount contributed to pensions.
From April 6, auto-enrolment contributions will increase to 8percent – meaning you will pay more into your workplace pension scheme.
Auto-enrolment is a government initiative which was put in place in 2012 to help people save for their retirements.
Almost 10 million people are saving for their pensions through auto-enrolment.
Employers are legally required to automatically enter eligible employees into a workplace pension scheme.
When you are signed up, a portion of your salary is paid into a pension – alongside contributions from your employer and a percentage from the government known as a pension tax relief.
The increase from five percent to eight percent means that the contribution from your salary will increase from three percent to five percent and your employer’s contribution will rise to three percent.
Estimates from Hargreaves Lansdown predict the average UK earner is expected to see an extra £30 leave their pay packet each month.
Workers earning the UK average wage of £28,759 will contribute £75.41 a month from 6 April – up £29.96 from the current contribution rate of £45.45.