What are the income tax rates 2019 and calculate how much you'll pay if Boris Johnson increases the threshold to £80,000?

THREE million workers could see their take home pay boosted under plans revealed by Conservative leader hopeful Boris Johnson.

He's promised to increase the threshold at which people have to pay the 40p rate of income tax from £50,000 to £80,000.

But how much tax you currently have to pay depends on how much you earn and where in the UK you live as the rules are different in Scotland.

So how Mr Johnson's proposals will affect you depends on your current situation.

It also depends on whether Mr Johnson tinkers with national insurance rates at the same time, as it's thought he may up these rates to pay for the tax cut.

Here's what you need to know.

How much income tax do I currently have to pay?

In England, Northern Ireland and Wales, most people get a tax-free personal allowance of £12,500 in the current 2019/20 financial year.

So if you earn less than this you won't pay any income tax.

  • If you earn between £12,500 and £150,000 then the first £12,500 you earn is tax-free.
  • After this, you pay 20 per cent on earnings between £12,501 and £50,000 – known as the basic tax rate.
  • If you earn more than £50,000, you'll pay 40 per cent on earnings between £50,001 and £150,000, known as the higher rate of tax.
  • And anything you earn over £150,000 is taxed at 45 per cent – known as the additional rate of tax.

If you earn over £100,000, your personal allowance goes down by £1 for every £2 you earn above this threshold.

This means that by the time you earn £125,000 you're left with no tax-free personal allowance.

What are the income tax rules in Scotland?

Income tax in Scotland is different, instead of there being a personal allowance and three rates of tax, there's a personal allowance and five rates of tax.

  • As is the case elsewhere in the UK, the first £12,500 you earn is tax-free.
  • Income between £12,501 and £14,549 is subject to the starter rate of tax at 19 per cent.
  • Earnings of £14,550 to £24,944 see the 20 per cent basic rate of tax applied.
  • While earnings of between £24,945 and £43,430 are subject to the 21 per cent intermediate tax rate.
  • Next there's higher rate tax of 41 per cent applied to earnings of £43,431 to £150,000.
  • And if you earn £151,000 or more you'll pay the top rate tax at 46 per cent.

Again, as in England, Northern Ireland and Scotland, if you earn over £100,000, your personal allowance goes down by £1 for every £2 you earn above this threshold.

This means that by the time you earn £125,000 you're left with no tax-free personal allowance.

What about national insurance?

National insurance is separate to income tax but it is also a tax on earnings that you have to pay when you earn over a certain amount.

Here, the rules are the same regardless of where in the UK you work but you stop paying it when you reach state pension age.

If you're employed, you'll pay 12 per cent on take home pay of £8,628 to £50,004 a year and 2 per cent on earnings above this.

If you're self-employed, the rules are different and depend on how much profit you make.

Who are the winners under Boris Johnson's plans?

As it stands, the key winners under Boris Johnson's plans are those who earn more than £50,000 and those who have hit state pension age and no longer pay national insurance.

Nimesh Shah, a partner at tax and accountancy firm Blik Rothenberg says these higher earners will be up to £6,000 a year better off under the plans based on our current national insurance thresholds – see the table below for how much better off you'll be.

However, a hike to national insurance to match a higher income tax threshold would "significantly erode" any overall benefit for workers.

Mr Shah said: "Ignoring any changes to the national insurance threshold, the benefit of increasing the higher rate threshold to £80,000 would be £6,000 a year (or around £115 per week).

"If the national insurance threshold were to align, that benefit would be reduced to £2,400 a year (or around £46 per week).

"This would essentially mean that those that don’t pay national insurance – pensioners and those who live-off their investment income – would be the main winners."

Tom Selby, senior analyst at investment firm AJ Bell, added: “The most obvious impact of this move would be to drastically reduce income tax bills for those earning between £50,000 and £80,000 – although this would in part be tempered by higher national insurance contributions.

"Higher-rate taxpayers who are above state pension age and don’t have to pay national insurance at all would likely be the biggest winners from the policy."

Mr Selby highlights that tax relief on pension contributions could also be cut under the plans.

He said: “Retirement savings incentives would also be affected, with tax relief on contributions for those earning between £50,000 and £80,000 dropping from 40 per cent currently to 20 per cent.

"Of course the combination of matched contributions from their employer, national insurance relief and tax-free investment growth over time mean there would still be every reason for this group of people to save in a pension."

How would Dominic Raab's national insurance cut affect me?

Mr Johnson isn't the only Tory party leader hopeful to make ambitious tax pledges.

Dominic Raab has promised to give low paid earners a pay boost by upping the rate at which national insurance becomes payable from £8,628 to £12,500.

He says it would save hard-working people £462 a year.

The Sun is working with tax experts to calculate what this means for you and we'll update this story as soon as we get a response.

Income tax rates rose this April giving 32million taxpayers a bonus.

But Tory leadership hopeful Sajid Javid has also vowed to cut taxes.

Meanwhile, Labour is plotting a £400 tax increase to average council tax bills for Middle England.

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