Plan your money 2019

2019 is set to be a year of changes for finances, with everything from council tax, state pension payments and inheritance tax set to change. Find out about the changes below and how your finances could be affected.

Taxes

Council tax

In April 2020, council tax is set to rise across the United Kingdom by up to 5%. At present, local councils set their own levy – however, ministers revealed in December that councils will be able to increase rates by up to 2.99% with many also to be allowed to add a further 2% to fund social care.

This mean that those who pay regular Band D council tax will see a potential rise of around £110 – however, the extra amount will depend on where you live due to the individual council rates.

Councils are expected to announce the changes on 27th March.

Inheritance tax

At present, when you pass away, you can leave up to £325,000 to your loved ones – tax free. This does not include the main residence allowance, which is currently £125,000 per person.

This means that anyone who owns a home can pass on up to £450,000 of wealth without inheritance tax being due.
From April 6th 2019, the main residence allowance will increase to £150,000 – this means that an individual will have a total allowance of £475,000 or £950,000 for married couples and civil partners.

To qualify for the extra allowance, you must have previously lived in the property and leave it to a direct descendant.

Income tax

From the 6th April, the personal allowance is increasing from £11,850 to £12,500 – this is the amount of money you can earn before you pay tax. In addition to this, the threshold for the 40% tax rate is also increasing from £46,350 to £50,000.

These changes will mean that all basic-rate tax payers will receive an extra £130 a year and higher earners will receive between £600 and £860, depending on their income level.  Those with incomes between £50,000 and £100,000 benefit by the full £860, before the gradual loss of personal allowance on income over £100,000 reduces the benefit to £600.

In reality, only high income pensioners will save the full £860, as they do not pay National Insurance, which is also increasing from April. When taking into account NI hikes, someone with a salary of between £50,000 and £100,000 would get an extra £520 a year, which reduces gradually for those with income over £100,000 to £260.

Pensions

State pension

The state pension increases each year in line with the greater of average wage growth, inflation (as measured by the consumer price index – CPI for short) or 2.5%.

This will mean that for those who currently receive the full new state pension, which was introduced in 2016, will see their weekly payment rise from £164.35 to £168.60 – an extra £4.25 a week, or £221 a year.

Furthermore, the basic state pension will rise from £125.95 to £129.20 – an extra £3.25 per week or £169 per year.
 

Work pension contributions

After the 6th April, the minimum workplace pension contributions for both you and your employer is increasing.
The contribution for staff will rise from 3% to 5%, this is applicable for all staff:
  • Over the age of 22,
  • Earning over £10,000
Whereas the contribution of your employer will be rising from 2% to 3%.

PPI

2019 marks the end of PPI claims. Therefore, if you believe that you were miss-sold Payment Protection Insurance (PPI), you must complain to the Financial Ombudsman or your provider no later than the 29th August 2019, or you will lose your right to claim your money back.

Help to buy ISA

The help to buy ISA is a savings account which offers first-time buyers a 25% bonus on savings specifically for a first-time property.

This means that for every £400 you save; the Government will provide a further £100 – up to a limit of £3,000.
This means that a first-time buyer can save a total of £15,000 [£12,000 of their money, topped with £3,000 from the Government].

The money boost from the Government is not repayable.

The Government are closing the ISA for new customers on 30th November 2019, however, if you currently have a help to buy ISA you can continue paying into the scheme and claim the bonus up until 1st December 2030.