The basic, higher and additional rates of income tax for 2019/20 remain at 20%, 40% and 45% respectively. The basic rate limit for 2019/20 rose to £37,500 (except in Scotland). The threshold at which a taxpayer starts paying additional rate tax is unchanged at £150,000. The personal allowance for 2019/20 increased to £12,500. The point at which an individual is liable to higher rate income tax is £12,500 + £37,500 = £50,000.
The personal savings allowance for interest received remains at £1,000 in 2019/20 for basic rate taxpayers (i.e. those who have no income chargeable at the higher or additional rates or their dividend equivalents). For taxpayers with income chargeable at the higher rate or its dividend equivalent, the personal savings allowance is £500.
Taxpayers with income chargeable at the additional rate or its dividend equivalent are not entitled to any personal savings allowance.
The 0% starting rate tax band for savings income other than dividends (e.g. bank and building society interest) remains at £5,000. This tax band is only fully available where earned income (e.g. salary, benefits in kind, pensions, etc.) does not exceed the personal allowance, and it reduces to the extent that earned income does exceed the personal allowance. So, for example, if earned income is £13,000, the 0% starting rate for savings income reduces from £5,000 to £4,500. Also, this 0% tax band is not a true exemption as it uses up part of the basic rate tax band.
The trust rate, which applies to the income of discretionary and accumulation trusts above the standard rate band limit of £1,000, remains at 45% for 2019/20 and the dividend trust rate is 38.1%.
Couples where at least one of the spouses (or civil partners) was born before 6 April 1935 can still claim the old married couple’s allowance. This allowance, which is relieved at 10%, is £8,915 for 2019/20. The income limit for the married couple’s allowance is £29,600. If this limit is exceeded, the married couple’s allowance is reduced by £1 for every £2 of excess income but can never take the married couple’s allowance down to a figure of less than £3,450.

Where it is earned income that is likely to take the individual into the £100,000 – £125,000 bracket they could consider reducing this by adopting one or both of the following strategies: starting, or increasing, the payment of regular monthly individual pension contributions, and topping up at the end of the tax year if required; or starting, or increasing, monthly regular pension contributions via a salary sacrifice arrangement, and topping up at the end of the tax year if required; or making charitable donations qualifying for gift aid.
The effective rate of tax in the £100,000 – £125,000 band of earned income is 60%. It may therefore be possible to obtain 60% tax relief on some pension contributions and charitable donations; even more with the National Insurance saving potentially available under a pension contribution via a salary sacrifice arrangement.
It’s also useful to note that a taxpayer may treat a gift aid donation made in the tax year ended 5 April 2020 (up to the date their tax return for 2018/19 is submitted) as paid in 2018/19, provided that their 2018/19 tax return is submitted to HMRC by the appropriate filing date (i.e. normally by 31 January 2020).
The 60% tax saving is based on:
20% basic rate tax relief at source on the pension contribution and / or gift aid payment;
20% higher rate tax relief on the pension contribution and / or gift aid payment through self-assessment;
20% reduction in income tax achieved through the return of the personal allowance.

The same result can also be achieved where a gross pension contribution reduces taxable income, e.g. an occupational pension contribution deducted from salary before tax, or an AVC to an occupational pension scheme. The 60% tax saving is based on tax relief being given at 40% under PAYE or through self-assessment, plus 20% from the reduction in income tax achieved through the return of the personal allowance.
By using salary exchange, it’s possible to save nearly 67%, provided the employer passes the savings they’ve made in reduced National Insurance (NI) contributions on to the employee, by making a higher pension contribution.

When an employer provides death-in-service benefits through a life assurance policy or offers retirement benefits through a qualifying relevant overseas pension scheme, the employee in question will usually name a beneficiary to receive any payment due on their death or to receive their retirement benefits.
Up to 5 April 2019, premiums paid into these schemes by the employer only represented a tax-free benefit for the employee if the named beneficiary was another employee or a member of the deceased employee’s family or household (e.g. spouse, civil partner, parents, children, dependants, domestic staff and guests). For 2019/20 onwards, the exemption is extended to include any named individual as the preferred recipient, irrespective of their relationship to the employee. The extended exemption will also allow employees to nominate a registered charity.

Individuals who wish to transfer wealth on to the next generation should consider making full use of their £3,000 annual exemption. If this was not fully used in the last tax year (2018/19), it can be used now provided the donor first fully uses their annual exemption for this tax year (2019/20). So, for somebody who has made no gifts, they can make gifts of £6,000 within their annual exemptions now.
For those who have income that is surplus to their needs, it may also be appropriate to establish arrangements whereby regular gifts can be made out of income in order to utilise the normal expenditure out of income exemption. An ideal way of achieving this is to pay premiums into a whole of life policy in trust to provide for any IHT liability.
Larger gifts could also be considered. Where ongoing control of the assets gifted is required, a discretionary trust will be useful, but care needs to be exercised so as not to exceed the available nil rate band. If the investor needs access to cash from the trust and IHT efficiency, a loan trust or discounted gift trust should be considered.
It may be worth revisiting IHT calculations for deaths occurring on or before 29 October 2018 to check if the correct method was used by HMRC in relation to the residence nil rate band. For options relevant to your financial circumstances please speak to your financial adviser.

Here’s what might happen to house prices, jobs, savings and pensions:
House prices: The Office for Budget Responsibility, the government’s independent forecasting agency, believes house prices will tumble by around 10% in a disorderly Brexit. The average UK house price is £216,515, according to Nationwide, so that would translate into around £21,000 off the average home, taking it back below £200,000 in London.
Mortgages: Faced with a recession induced by a no-deal Brexit, the Bank of England cuts base rate close to zero and embarks on a monetary loosening policy that sends interest rates across the board to new lows. Mortgage rates respond, with the best fixed rates dropping below 1%.
Savings: The Bank of England moves quickly to cut interest rates and embarks on a new round of quantitative easing to boost the economy. Once again the banks are awash with cheap money, meaning the interest rates payable to those with savings is only going one way – down. At the height of the financial crisis the rates payable to savers in plenty of accounts fell to 0.1%, resulting in negligible returns.
Pensions: Workers with final salary-style pensions aren’t affected, as they have guarantees, but for everyone else, their pension pot depends on the performance of the stock market. Which way will markets go in a Brexit crash-out? Broadly speaking, domestically focused UK companies, which make most of their profits in the UK, will be obvious casualties and their share prices could fall heavily in the next few months. But the giants of the London stock market – such as BP, Shell, HSBC and Glaxo – make the vast majority of their profits in overseas markets and are much better protected from Brexit. Indeed, as sterling plummets they are likely to rise in value, because their dollar earnings suddenly become worth much more in pounds.

In September we are holding a (free to attend) retirement-themed seminar. If you are planning for or are already in retirement, this is a perfect opportunity to learn more. The session includes talks on:
•             the psychology of retirement
•             what modern retirement looks like
•             financial planning for retirement
For more information and to book your place, please visit our Eventbrite page.
The deadline for bookings is Friday 30th August by 5pm.  The event is open to clients, their friends and family and our professional connections.

Book here – https://www.eventbrite.co.uk/o/wealth-design-17212292508

Whilst the residence nil rate band of £150,000 per person from 2019/20, rising to £175,000 per person (from 2020/21) may provide some respite from potential IHT liabilities remember that:
this only applies on deaths occurring after 5 April 2017;
it will not help people whose estate exceeds £2.35 million (£2.7 million on the second death).

The IHT nil rate band will remain frozen at £325,000 until April 2021, increasing the amount of IHT collected by HMRC to substantial levels, particularly as house prices and investment values increase. People whose estates may be affected should therefore take early action.
Changes to the IHT residence nil rate band
Any unused residence nil rate band can be transferred to a surviving spouse (or civil partner) who meets the relevant requirements. The residence nil rate band is also available where a person downsizes their residence or ceases to own a home on or after 8 July 2015, provided the former home would have qualified for the residence nil rate band had it still been owned. In this situation, assets of an equivalent value, up to the limit of the relevant residence nil rate band, can be passed on death to one or more direct descendants on a tax-free basis.
Finance Act 2019 made amendments to the residence nil rate band, with the key change clarifying the operation of the downsizing provisions. Unfortunately, the new legislation, which applies to deaths occurring on or after 30 October 2018, is less favourable to taxpayers than the old rules. Until 29 October 2018, only the value of the qualifying residential interest comprised in the deceased’s estate which is part of the chargeable transfer was counted in the calculation, whereas, after that date, the value of the qualifying residential interest comprised in the deceased’s estate which is both chargeable and exempt has to be considered. An example of where this is relevant is where a residential property passes equally on death to a surviving spouse (i.e. an exempt transfer) and to a direct descendant such as a son or daughter (i.e. a chargeable transfer).
It has been reported by some tax commentators that HMRC had been using this method of calculation for deaths occurring on or before 29 October 2018. If so, then some death estates will have been overcharged IHT.

The allowances for trading and property income remain at £1,000 for 2019/20. Individuals with income of this type which does not exceed their allowance do not have to declare and pay tax on such income. This eliminates the need for the recipients to determine their allowable expenses or to contact HMRC to notify them of the receipt of this income.
A partial relief applies where the individual’s income is above the level of the allowance, so that the individual can elect to pay tax based on their receipts less the allowance, instead of deducting their actual expenditure.
Alternatively, an individual can elect not to be given full relief, so that the tax result will be calculated using income received less expenses incurred. This option is likely to be adopted where there is a loss and the income does not exceed £1,000.

Rents have risen by the highest amount in two years as landlords hike prices amid a Government clampdown on buy-to-let properties. Bills have gone up 1.3% on average in the year to May – the biggest annual rise since September 2017. The new figures have been analysed by the Office of National Statistics (ONS) which monitors national rents. It means that someone who was paying £500 a month rent in May 2018 is now forking out £506.50 a month or an extra £78 a year.
But in places like London where rents rose by 0.9% in the past year, tenants paying the average £2,034 a month, according to property portal Rightmove, have seen bills rise by £219.68 a year. At the same time there are signs that buy-to-let landlords may be returning to the market, encouraged by cheap property prices and rising yields. Buy-to-let investors have been steadily retreating from the market since the government introduced a 3% stamp duty surcharge on second properties in 2016 and reduced landlords’ ability to offset mortgage interest against profits.
Commentators believe slowing house-price growth and falling prices in some areas are helping to boost landlord yields. This makes the sector a little more appealing, despite the policy hurdles.