3 Changes To Your Personal Finances In The New Financial Year 2019/2020

Financial years officially start on the 6th of April, which means changes that were announced by the Chancellor of the Exchequer Philip Hammond in the most recent Budget have now gone into full effect. The switch could have tangible effects on your personal finances for the next twelve months.

Here are the four most noteworthy changes to your financial life in fiscal year 2019-20:

1. Slightly lower income taxes for everyone

Changes to the income tax framework have the most direct impact on the average taxpayer. This year the tax slabs and allowances have all shifted higher leading to a slightly lower tax burden for everyone across the country. The personal allowance (income on which residents pay no tax) rises from £11,850 to £12,500. That means all Britons get an extra £130 a year in disposable income. Meanwhile, the threshold for the highest tax bracket (40%) has also been raised from £46,350 to £50,000, leading to an extra £860 in disposable cash for the nation’s most well-paid individuals (Sam Meadows, The Telegraph, 6 April 2019).

However, parallel changes to National Insurance thresholds could offset that gain for wealthy taxpayers to a certain degree.

2. Relief for entrepreneurs and investors

A few key changes may incentivise investments and entrepreneurship across the British economy. The Junior Isa limit will increase from £4,260 to £4,368, helping families save more money for their children's future. Capital gains tax (CGT) allowances have been lifted from £11,700 to £12,000, helping investors save more money on their divestments. And the Entrepeneur’s Relief gives a CGT break to those who sell shares in an unlisted company that meets certain conditions, helping entrepreneurs and small or medium-sized business owners keep more of their gains from selling.

3. The crackdown on buy-to-let investors continues

The crackdown on buy-to-let investors that was kicked off by Chancellor George Osborne in 2015 is being implemented in phases and will be completed by the next financial year (Sam Meadows, the Telegraph, 8 February 2018). This year, landlords can only claim 25% of their mortgage interest rate as a business expense for tax relief. Meanwhile, landlords operating Airbnbs will only be able to claim the £7,000 relief under rent-a-room program if they occupy the property and list a spare room.

In other words, the government has tightened the rules on landlords across the country.

Altogether, the new financial year should put more money in the pockets of average citizens, business owners, and investors, while reducing concessions for landlords.

Information is based on our current understanding of taxation legislation and regulations which is subject to change.

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