Rates and allowances

The measure

Income tax

The Chancellor has increased the income tax personal allowance to £12,500 (from £11,850) and the basic rate band to £37,500 (from £34,500), giving a higher rate threshold of £50,000 for 2019/20. This increase means the Chancellor will meet the Conservative Manifesto pledge for a personal allowance of £12,500 and higher rate threshold of £50,000 a year earlier than planned.

The combined personal allowance and higher rate threshold changes will mean that a basic rate taxpayer will save £130 in 2019/20 compared to 2018/19 and a higher-rate taxpayer will save £860 in 2019/20 compared to 2018/19. Those with income over £125,000 who do not receive a personal allowance will see a tax saving of £600.

The Chancellor has also announced that the rates will remain the same in 2020/21 and will then increase in line with CPI from April 2021.

National insurance contributions

The national insurance contribution (NIC) limits for 2019/20 will rise broadly with the Consumer Prices Index (CPI). The upper earnings limit (above which the NIC rate is 2%) rises to £50,000 in line with the higher rate threshold, and the primary threshold for employees (above which NICs are payable) increases from £8,424 per annum to £8,632.

Taking account of NIC, a basic rate taxpayer will see an overall saving of £155 (income tax saving of £130 and NIC saving of £25), and a higher rate taxpayer will see a net saving of £520 (tax saving of £860 and NIC increase of £340). Those with income over £125,000 will see a net saving of £260 (tax reduction of £600 and NIC increase of £340).

Capital gains tax

The annual exemption will increase to £12,000 (from £11,700) from April 2019.

Who will be affected?

All individual taxpayers. 

When will the measure come into effect?

6 April 2019