Basic-rate taxpayers will get an extra £130 in 2019-20, as the Chancellor announced that the personal allowance will rise to £12,500, a year earlier than promised in the Conservative manifesto.
Higher-rate taxpayers will also be better off, with the higher-rate threshold rising to £50,000 (including the personal allowance), equivalent to an extra £860 per year.
However, some of the gains will be offset by increased national insurance contributions, as the 12% NI band is tied to the higher-rate threshold. As such, working age employees will pay 12% of their earnings between £8,632 and £50,000 and 2% on higher amounts.
From April 2020 onwards, the basic and higher-rate thresholds are set to remain frozen, before beginning to increase in line with inflation from April 2021.
These changes won’t apply in Scotland, and any changes to income tax in Scotland will be announced at the Scottish Budget in December.
- For up-to-the-minute coverage of the Chancellor’s announcement, visit our Autumn 2018 Budget live feed.
Calculate your income tax for 2019-20
The changes announced by Mr Hammond will have a direct impact on how much tax you pay next year.
You can use our income tax calculator to work out your income tax and National Insurance bill for 2019-20 and for the current year – use the toggles to choose the year you need.
How the personal allowance and higher-rate thresholds have changed
Our graph below shows how the personal allowance has increased over the past five years, and the change for next year.
If you’re a higher-income earner, this Budget also brings you a windfall. In our graph, you can see how much you can earn before paying the higher tax rate and how this has changed in recent years.
- Find out more: current income tax rates and rules…
Capital gains tax allowance rises
The personal allowance for capital gains will rise to £12,000 in 2019-20, allowing people to make an extra £300 profit on asset sales before they owe any tax.
Capital gains tax is charged on the profits you make when selling assets, beyond the annual allowance. If you make losses on other sales, these can be offset against your gains. You can find out more in our guide to capital gains tax rules for 2018-19.
Our graph below shows how the capital gains tax personal allowance has changed over time.
The Chancellor also announced measures to reform lettings relief, a mechanism that allows people who have both let out their home and lived in it to avoid capital gains tax. According to Mr Hammond’s plans, the relief would only be available to landlords who share their property with a lodger.
The period that landlords can claim this relief will also be cut from 18 months to 9 months, increasing the amount of tax that these landlords will pay. However, the 36-month period will remain for disabled people and those in care homes.
These changes are not finalised, but are expected to come into force in April 2020, following a consultation.
- Find out more: How does lettings relief work?
Tax-free savings allowance frozen
The 0% savings band was frozen at £5,000. Along with the increased personal allowance and the existing personal savings allowance, this means savers can receive up to £18,500 of savings interest before paying tax in 2019-20, if they have no other income.
For people who earn more than this from a job or pension, the personal savings allowance also held steady at £1,000 for basic-rate taxpayers, and £500 for higher-rate taxpayers.
This will be the third year that this allowance has been frozen since it was introduced in April 2016.
- Find out more: How much tax will you pay on your savings