Income tax
The Chancellor continued his commitment to increase tax thresholds, particularly for the low or average paid worker. The tax free personal allowance will increase to £12,500 in 2019/20 and the basic rate tax band will become £37,500. This means that an individual will not pay higher rate tax (40%, or 32.5% on dividends) until their taxable income is greater than £50,000.
Capital gains tax
At present, where an individual sells their main home, principal private residence relief operates to ensure that the final 18 months of ownership is exempt from capital gains tax, even if the owner has moved out. From 6 April 2020, this period will be halved to 9 months, meaning that vendors will need to sell their previous homes more quickly if tax is to be avoided.
A further existing relief provides a capital gains tax exemption for up to £40,000 of gain (£80,000 for a couple) if the property was a residential let, provided for part of the time it was also the owner’s principal private residence. From 6 April 2020, this relief will only apply in the case of shared occupancy, the most common example being where a room, or rooms are let to lodgers.
The announcement of an increase in the capital gains tax-free annual exemption for 2019/20 to £12,000 from £11,700 will be small compensation for the restriction to two valuable reliefs.
Universal credit
The amount an individual can receive as universal credits is restricted, depending on the claimant’s earnings. The amount above which credits are tapered (the work allowance) will be increased by £1,000 meaning that a claimant can earn more without loss of support. This increase will commence from 6 April 2019.