Changes to Your Benefits and Taxes in 2019

What can UK residents expect in 2019?

As the 2018 – 2019 tax year is drawing to a close, you should be aware of the changes which could affect your personal finances in 2019. New tax rules will be coming into effect from April 2019 which could leave some people better off and some worse. In addition, certain state benefits will be changing slightly in 2019. Read this guide to find out what is changing throughout this year and how these changes could affect you financially.

Universal Credit Changes 2019

If you are claiming the Universal Credit benefit and you have children or a disability, then your work allowance will increase. This is the amount that you can earn before your Universal Credit is withdrawn. From April 2019, the work allowance will rise from £409 to £503 a month. When the Universal Credit award includes housing costs, the work allowance will increase from £198 to £287 a month. If you have no children and you or your partner are fully capable of working, then this won’t apply to you.

Before this, from February 2019, new claimants will no longer be able to claim Child Tax Credit. Anybody who has been claiming Universal Credit since April 2017 will now have a two-child limit imposed on their claim. The limit will also apply to any claimants who go on to have a 3rd child. Previous plans to apply the two-child limit to all claimants are no longer going ahead. This means that if you have been claiming it since before April 2017 and have more than 2 children, this limit will not affect you.

Towards the end of the year, in October 2019, there will be a reduction to the maximum deduction rate for repayments. This means that they can only deduct up to 30% of the claimant’s standard Universal Credit allowance to repay an advance payment instead of 40%. The period for recovering advance payments will stay at 12 months until October 2021. After this, the recovery period will be increasing from 12 months to 16.

Finally, now that the UK-wide Universal Credit rollout is complete, the government will start moving claimants from the older benefits onto Universal Credit. This includes people claiming Housing Benefit, ESA, JSA, Income Support, Child Tax credits, and Working Tax credits. Due to issues with the rollout, they are postponing the complete migration until after they carry out a pilot scheme. From July 2019, the government will begin to transfer about 10,000 claimants from these older benefits onto Universal Credit. This will only happen to you if the DWP contacts you.

State Pension Changes 2019

When the 2019 – 2020 tax year begins, the State Pension will increase by 2.6%. This means that pensioners receiving the full State Pension will get an extra £4.25 a week, or a total extra of £220 by the end of that tax year. Those claiming the basic State Pension will receive an increase of £3.25 a week, which is still a respectable £169 bonus for the year. However, the current State Pension age of 65 will also be rising, to 66 by October 2020.

For those auto-enrolled in workplace pension schemes, the minimum contributions will be increasing as well. Previously, employers had to pay 2% into the employee’s pension pot, while the employee had to pay 3% out of their salary. From April 2019, these contributions will rise to 3% and 5% respectively, unless you choose to leave the pension scheme.

Pension Credit Changes 2019

A more damaging change to pensions comes in the form of new rules for Pension Credit. From 15th May 2019, pensioners with a partner who is still working age (younger than 65) will no longer be allowed to claim Pension Credit. They will now have to claim Universal Credit as a couple instead. According to the current rates, this would mean a loss of around £140 a week. In total, this could result in a loss of up to £7,000 in a year.

This new rule will leave such couples in the strange situation of being better off splitting up and living separately. With an average age gap of 2.6 years, these changes would be a substantial blow to pensioners and their working-age partners. The charity Age UK is criticizing these cuts, which may be stealthy but will have a substantial effect on the financial stability of claimants. If you are already receiving Pension Credit before the new regulations begin, then this will not affect you unless you report a change of circumstances. For example, if you move to a new house or go on a month-long holiday, then you will have to change to the updated system. The DWP will tailor the conditions for the working-age claimant to match the couple’s circumstances. The pensioner won’t have to work.

Minimum Wage Changes 2019

The National Living Wage, which is the minimum amount that a worker aged 25 or over can be paid per hour, is set to rise by 4.9% from April 2019. This means a 38p increase, up to £8.21 per hour. On average, those on the minimum wage will receive an extra £700 over the course of the year. Workers between 21 and 24 years old will also see an increase to £7.70 an hour, while those between 18 and 20 will now receive £6.15 an hour. Even employees who are under 18 will get 15p more an hour with an hourly rate of £4.35. Apprentices under 19 years old in the first year of their apprenticeship will also get an increase, rising to £3.90 an hour.

Income Tax Changes 2019

The Personal Allowance is due to rise from £11,850 to £12,500 for the 2019 – 2020 tax year. This allowance is the maximum amount that you can earn without having to pay Income Tax on it. Those who have been paying Income Tax at the basic rate of 20% will now be better off by £130 a year. Higher earners who were on the 40% tax rate will get to keep up to £860 more a year due to the threshold rising from £46,350 to £50,000.

The negative side for those higher earners is that the threshold for the lower rate of National Insurance contributions is also rising by the same margins. This means that these workers will now have to deduct 12% of their annual earnings over £8,632 in National Insurance contributions, compared to the 2% they would have been paying previously. For those already paying 12% in National Insurance contributions, the threshold for that rate is rising from £8,424. If you earn less than £8,632 a year, then you won’t have to worry about National Insurance deductions.

Self-Assessment Changes 2019

Those in full-time self-employment, or earning extra income from self-employment beside their primary source of income, must submit a Self-Assessment Tax Return annually to HMRC. The latest deadline for this is 31st January, after which late submissions will result in a fine from £100 up to £900. Those currently submitting self-assessment tax returns for the 2017 – 2018 tax year may not know about changes to the rules. For example, landlords can now only deduct a maximum of 75% of interest on mortgages from their profits. Buy-to-let investors must calculate how much mortgage interest they can deduct themselves. By 2020, this will stop completely, as landlords will have to include all mortgage interest.

Taxpayers will also have an allowance of up to £1,000 for earnings from trading or property. This could be from loaning services or equipment or selling possessions or creations. The property allowance will not apply if you claim relief for renting a room. Neither the trading nor the property allowance will apply if you are deducting business expenses. People will not have to submit a self-assessment tax return at all for earning below £1,000 in a year from trading or property, but will if they earned more.

Council Tax Changes 2019

Many local councils simply don’t have the government funding that they need to operate. This means that Council Tax is likely to increase again this year. Many areas can expect the maximum legal increase of 4.99%, which includes 2% for social care services. Even with this Council Tax rise, the predicted gap in funding would still be more than £3 billion. If authorities want to increase Council Tax by more than 4.99%, they must hold a local referendum to decide this. The precept for the police forces will be doubling from £12 to £24 as well. Despite increases in Council Tax, many councils will have to reduce or cancel some public services to make ends meet. Not only will residents have to pay more, but those in deprived areas will also suffer from a lack of services anyway. You can expect your local council to announce the higher Council Tax rates for your area in February or March. You will then be able to see how much more you are going to have pay and try to work out your budget for this.

Stamp Duty Changes 2019

When purchasing a residential property worth more than £125,000, the buyer must pay a Stamp Duty Land Tax. The percentage of this tax due depends on the value of the property. This tax will apply whether it is a freehold, leasehold, or shared-ownership property. The good news for anyone looking to buy a shared-ownership property is that you will not have to pay Stamp Duty Land Tax if you are a first-time buyer. In order to qualify for this tax break, you must earn less than £80,000 a year and the property must be worth less than £500,000. You must also not be an existing homeowner at the time of entering your first shared-ownership agreement. However, if you bought a shared-ownership property since 22nd November 2017, you can apply for this tax relief retrospectively.

Inheritance Tax Changes 2019

The Inheritance Tax will apply to property which is passed on after a person dies, according to the will of the deceased. This tax should not apply if their estate has a value of less than £325,000, or if they leave everything to their spouse or a charity. Otherwise, the inheritors will usually have to pay 40% of the value above this nil-rate band level in Inheritance Tax. However, if the person passes on their home to their children, then they will benefit from a property allowance. The main residence nil-rate band is currently £125,000, meaning that in this case the heir would have a total allowance of £450,000 before having to pay Inheritance Tax on the property. In April 2019, the main residence nil-rate band will increase to £150,000, for a total allowance of £475,000. It will increase again in the following tax year to £175,000, so that children inheriting their parents’ home will be exempt from Inheritance Tax on up to £500,000. In all other cases the nil-rate band will stay at £325,000.

Car Tax Changes 2019

Car Tax, or Vehicle Excise Duty, has been changing dramatically over the last few years. A system overhaul in 2017 introduced new car tax rates according to the level of CO2 emissions from each vehicle. After a lower first-year charge, many cars moved up a band in 2018 – 2019 to a higher tax rate. Drivers of cars costing more than £40,000 also owe a premium of £310, rising to £320 from April 2019. The flat rate for cars that emit CO2 was £140, but from April 2019 this will rise to £145. There is a £10 discount for hybrid cars which will stay the same. Cars registered before 1st April 2017 will only see a maximum increase of £15 in their car tax.