Private client overview

The personal allowance will increase to £12,500 from 6 April 2019 (currently £11,850), one year earlier than expected.

While this is good news for a large number of taxpayers, it won’t be for those who have their personal allowances tapered, because they have income in excess of £100,000. Those impacted will suffer an effective tax rate of 60 per cent to the extent their income now falls between £100,000 and £125,000.

The higher rate band threshold will also increase from £46,350 to £50,000 from April 2019, although this doesn't apply in Scotland.

Both the personal tax allowance and basic rate band increases were a manifesto commitment to be reached by April 2020 and have been made one year earlier. The allowance and band will therefore be frozen for the following year, before the inflationary increases resume.

Other changes for individual taxpayers include more stringent rules for the favourable Entrepreneurs’ Relief (which reduces the capital gains tax rate to 10 per cent for individuals selling their business) and main residence relief which has been restricted.

No other changes were made to capital gains tax, the main rate of 20 per cent remains fairly generous, pensions tax relief where full tax relief is still available in some circumstances and inheritance tax, where some significant reliefs remain available. 

Inheritance Tax remains one to watch as the government instigated a review earlier in the year and we await the outcome of that.