14th April 2020
Firmly in the 2020/21 tax year now we look at what changes the new tax year will bring for individuals and businesses; limited companies in particular.
Good news if you are an employer as the Employment Allowance increases from £3,000 to £4,000 for businesses where the Employers NI liability is below £100K a year.
No changes regarding the Corporation Tax. The planned decrease to 17% has been delayed, for now, so the rate remains 19%.
The VAT registration threshold above which you must register for VAT remains at £85,000 for the next tax year. The standard VAT rate will also stay at 20%.
As you probably aware now, changes to the off-payroll working rules (IR35) have been delayed until April 2021. Until then, those contracting in the private sector will remain responsible for their IR35 determination.
All zero-emission company cars will attract a reduced percentage of 0% Benefit in Kind tax in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23. See our blog on the subject here.
If you are working from home as the Government increases the use of home allowance claimable to cover household expenses while working from home from £4 to £6 per week.
Any amount over £10,000 loaned to the director of a limited company will be deemed a beneficial loan unless the director pays interest. If interest is not incurred at 2.5%, income tax is charged on the beneficial loan, to the director at the marginal rate, plus Class 1A National Insurance Contribution of 13.8% on the company. Remember, further taxes apply if the loan is not repaid within nine months of the company year-end date.
No change in the rate of entrepreneur’s relief at 10% to be paid when disposing of all or part of a business where certain criteria are met.
The rate of Statutory Sick Pay is increasing from £94.25 to £95.85 in 2020/21.
The level at which employees start paying NI (National insurance threshold) will increase with inflation from £8,628 to £9,500.
The Personal Allowance remains at its current level of £12,500 for 2020/21 along with the higher rate tax limit, which remains at £50,000. Further information on tax rates across the UK can be found in our budget summary.
The Marriage Allowance for couples in the basic rate tax band will continue to be 10% of the personal allowance. It can be transferred to a spouse or civil partner.
Pension Allowance remains to be £40,000 for 2020/21. The annual allowance is a limit on the amount that can be contributed to your pension each year, while still receiving tax relief. It’s based on your earnings for the year.
The Personal Savings Allowance will remain at £1,000 for basic rate taxpayers and £500 for those in the higher rate bracket. Any interest earned up to these amounts will be tax-free.
Tax rates on dividends will remain the same, being the first £2,000 tax-free and then taxed at 7.5% if your total income falls in the basic rate tax band. For those in the higher rate and additional rate, brackets will pay 32.5% and 38.1% respectively.
The CGT annual exemption will increase from £12,000 in 2019/20 to £12,300 for 2020/21 for any gains made from disposal or sale of an asset. After 6th April 2020, any chargeable gain on disposal of UK residential property must be reported by submitting a “residential property return” within 30 days of completion, with the tax payable by the same date. What you pay will either be 18% or 28% depending on your other income.
In terms of Inheritance Tax, the basic allowance of £325,000 remains unchanged. What has changed is the introduction of the new ‘residence nil rate band’ (RNRB) commonly referred to as the ‘main residence’ band, which is an additional threshold you’ll receive on top of your existing allowance if you pass on a main residence. The 2019/20 tax year has seen the RNRB allowance go up to £150,000 (meaning a total individual allowance of £475,000) and it will rise again by £25,000 in 2020/21 when it reaches £175,000 (meaning a total allowance of £500,000).
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