Financial Planning for 2019: What to Expect & Do

By February 13, 2019Financial Planning

With 2018 now over and January ushering in a season of New Year’s resolutions, now is a great time to become aware of some important financial announcements for the months ahead.

We recommend that you factor these into your financial planning. In light of this, here are some of the key highlights you should know about for 2019:

Help to Buy ISA

Set up by the government to help people get onto the property ladder, 2019 is the final year that it will be available. From the 30th November, the scheme will be shut down to new entrants.

To quickly recap what this ISA offers, it allows you to put aside £200 per month (tax-free) – with the government putting an additional 25% towards your property purchase when it is finalised.

With the imminent conclusion of this scheme, you may wish to consider discussing this with us soon, if you think the Help to Buy ISA might be for you. Of course, once it is gone then you might want to consider the Lifetime ISA as an alternative.

A Lifetime ISA allows you to save more towards a property (up to £4,000 per year) but there are fewer accounts on offer compared to the market for Help to Buy ISAs.

Help to Save

This little-known initiative was launched by the government in September 2018, and is certainly worth a look if you meet the eligibility criteria (e.g. Crown Servants and members of the Armed Forces). Essentially, this scheme allows you to put £1-£50 per month into a Help to Save account over four years. For each £1 you put in, the government will put in an extra 50p.

If you put aside £50 each month into this account for four years then not only would you have £2,400 saved. You would also have an extra £1,200 from the government.

Income Tax & Pay

The Personal Allowance is the threshold where after you start to pay the Basic Rate of Income Tax (20%). In 2018-19 this is currently £11,850, but from April 2019 this will rise to £12,500.

Moreover, at this time Higher Rate taxpayers will also soon be taxed at 40% on earnings over £50,000 (instead of £46,350). The minimum wage is also set to rise from £7.83 to £8.21.

Be aware that National Insurance contributions will also be rising to 12% on earnings between £46,350 to £50,000. Many Higher Rate taxpayers might find their Personal Allowance increase wiped out by this.

Pension contributions

Whilst many people are set to pay less Income Tax, those who are part of an Auto Enrolment Scheme might not see this reflected very much in their take-home pay from 6th April 2019.

From this date, the minimum employees must contribute towards their pension will be 5% instead of the current 3%. You can choose to opt out, of course. However, we urge you to think carefully before doing so as this money might be very useful for your retirement financial plan.

On the subject of pensions, recipients of the State Pension should also note that this will rise by 2.6% from April. This means the basic State Pension will go up to £129.20 and the flat-rate State Pension (i.e. for those who retired after April 2016) will go up to £168.20.

The Lifetime Allowance will also be rising from £1,030,000 to £1,055,000, in line with CPI inflation.

Rising railway fares

One unfortunate development for commuters in 2019 is the rise in rail fares by 3.1% from 2018. If you have an annual season ticket from Manchester to Liverpool, for instance, then this means you’ll likely be paying an extra £100.

Confronted with this situation, for young adults it’s worth keeping an eye out for developments on the proposed 26-30 Railcard. Similar to the 16-25 Railcard, the current proposal is that members would pay £30 in order to receive a third off certain rail fares for a 12-month period.

For people outside of these age brackets, you might consider the 60+ Senior Railcard if you have not already done so. There is also the Two Together Railcard if you travel as a couple, or the Family and Friends Railcard for those travelling with children aged 5-15.

Buy-to-let changes

If you are a landlord, then from 6th April 2019 you should be aware of a key change to the rules which might affect you (Higher Rate taxpayers should take special note).

In 2018-19, you can claim tax relief on 50% of your mortgage interest payments. However, in the upcoming financial year this will go down to 25%. By 2020-21 this will reduce completely to zero. For some people, this might push you up into the Higher Rate tax bracket.

Inheritance tax

From 6th April, although the standard Nil Rate Band (i.e. the threshold where afterwards your Estate faces a 40% inheritance tax bill) will not be going up, the overall threshold for your Estate may be higher if you own a residential property.

You will still be eligible to pass on up to £325,000, tax-free, yet you will also be able to pass on an extra £150,000, if your share of a property goes to your spouse or direct descendants. (An increase of £25,000).

Be aware, however, that if your Estate is worth over £2 million then this additional Residence Nil Rate Band allowance will go down by £1 for each £2 you are over the threshold.