The Conservative Party pledge to reduce income tax bills during the December election has been confirmed to take effect from April 2020.
The Treasury has issued a press release to state the annual Class 1 Primary Threshold (for employed people) and the Class 4 Lower Profits Limit (for self employed people) is being raised from £8,632 to £9,500.
31 million people should benefit by up to £104 per year, or around £8.67 per month.
Employer's will not be getting the full benefit however. NIC thresholds have been aligned for a while now, but from April 2020 employers secondary threshold will only be increased to £8,788. This means whereas the employee will be liable to pay NIC from £9,500 of income and up, employers will pay their percentage from £8,788 and up.
The lower earnings limit is increased by £120 per year from April and this will affect you if you have an auto-enrolment pension.
Additional details regarding tax changes for 2020 have not been announced but it is known that upper limits for national insurance, where the percentage deducted from pay for national is lowered, will remain static and not be extended and thus hurt higher earners. The current point at which NIC deductions are reduced to 2 percent of pay is at £50,000 of gross income.
Interesting the government states that the eventual goal is to raise the national insurance threshold to £12,500. It would be assumed this was based on achieving parity with the basic personal allowance. The press release does state that all other thresholds will rise by inflation but in the wording does this exclude the personal allowance? Will it remain frozen from April 2020?
We previously wrote an article where it was mooted that in order to fund the increased budget for the NHS the government would limit increases to the personal allowance.
If the personal allowance remains frozen to last year's level, then any increased take home in real terms would be eroded by inflation.
You can use our calculator to find out how much tax you will pay in 2020.