5 pension changes to have on your radar in 2019/20

Rachael Oku

by , Head of Brand and Communications

11 Apr 2019 /  

11
Apr 2019

5 pension changes to have on your radar in 2019/20

On 6 April 2019 several pension and tax changes, outlined in last autumn’s Budget, came into effect. From increases to Auto Enrolment contributions, tax rates and the State Pension – here are five key things that may affect your pension in 2019/20.

1. State Pensions increase by 2.6%

Both the basic State Pension and new State Pension have increased by 2.6%, seeing the weekly amounts rise by £3.25 and £4.25 respectively. Retirees on the basic State Pension will now get £129.20 a week, and those on the new State Pension will receive £168.60 a week (or £8,767.20 a year).

2. Minimum combined Auto Enrolment contributions rise to 8%

Under UK law all employers must offer a workplace pension and automatically enrol any eligible workers. Both employers and employees have to pay into this pension, unless the employee opts out. The minimum contribution for employers has risen from 2% to 3% of ‘qualifying earnings’, and from 3% to 5% of ‘qualifying earnings’ for employees, which includes 1% tax relief from HMRC.

For 2019/20 ‘qualifying earnings’ are considered to be the earnings you make between £6,136 and £50,000.

3. Increase to the lifetime allowance

The lifetime allowance is a limit on the amount of money you can withdraw from your pension before triggering an extra tax charge from HMRC. For 2019/20 it’s increased in line with the Consumer Price Index, rising to £1,055,000.

The new lifetime allowance increase, up £25,000 from 2018/19, applies to any withdrawals you make from your personal or workplace pensions, including defined benefit pensions and defined contribution pensions. The State Pension is separate, and does not count towards this allowance.

4. Personal tax allowance rises to £12,500

As of last week, the personal tax allowance has gone up from £11,850 to £12,500. That means all taxpayers in the UK can now receive £12,500 of income, before basic rate tax kicks in. This allowance applies to all of the ‘earnings’ you receive, whether that’s through employment or pension income.

5. Higher rate income tax threshold increase

If you normally pay the higher rate tax, you’ll also benefit from an increase to the amount of money you can earn before 40% is deducted from your earnings. For 2019/20 the higher rate has risen from £46,350 to £50,000 for tax payers in England, Wales and Northern Ireland.

You can see a breakdown of all of the tax rates for 2019/20, including those for Scotland, below.

Income Tax rates 2019-2020 (England, Wales and Northern Ireland)

Income Tax Band Your income Income Tax rate
Your personal allowance Up to £12,500 0%
Basic Rate £12,500 - £37,500 20%
Higher Rate £37,501 - £150,000 40%
Additional Rate Over £150,000 45%

Income Tax rates 2019-2020 (Scotland)

Income Tax rates 2019-2020 (Scotland)

Income Tax Band Your income Income Tax rate
Your personal allowance Up to £12,500 0%
Starter Rate £12,500 - £14,549 19%
Scottish Basic Rate £14,549 - £24,944 20%
Intermediate Rate £24,944 - £43,430 21%
Higher rate £43,430 - £150,000 41%
Top rate Over £150,000 46%

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