Making Tax Digital is at the forefront of everyone’s minds, but it’s not the only business tax change business owners need to be aware of. To help, Kim Redwood-Lee rounds-up a gambit of 2019/2020 tax year changes that could impact SME accounting processes, earnings and operations.
Personal Allowance – increased to £12,500
Self-employed freelancers are set to benefit from the increase in Personal Allowance. The tax-free sum has risen from £11,850 to £12,500. This nets the basic-rate taxpayer an additional £130 more.
2019/2020 also brings changes to the basic rate tax band – which has increased to £12,501-£50,000 in taxable income.
The threshold for the high rate tax band (which is 40%) will increase to £50,000 (from £46,350). This amount includes the increased Personal Allowance.
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The 2019/2020 tax year brought no change to the Dividend Allowance – which remains at £2,000. However, the increased tax thresholds mean that as company Director or Shareholder you can take more in dividends before paying the higher dividend tax rate.
National Living Wage – increase to £8.21
The National Living Wage applies to employees aged 25 and above. So long as they’re not within their first year of an apprenticeship, business owners will now be required to increase their wage to £8.21 an hour.
Business rates relief for small retailers
‘Small retailers’ could be entitled to a third off business rates.
To qualify a business property’s rateable value should be less than £15,000, or the business should only operate from one property. If the business takes on a second property, the existing relief on the main property would continue for 12 months.
If a business operates from a property with a rateable value of £12,000 or less, then under the new rules business rates would be zero.
Extension of The New Enterprise Allowance
The New Enterprise Allowance (NEA) might well be lower than Job Seeker’s Allowance, but the initiative does give much needed support to ambitious entrepreneurs and freelancers launching new business ideas. The Government has confirmed that the growth advice and funding scheme will continue for another two years with space for another 30,000 benefits claimants.
Benefit in Kind (BiK) tax rates have increased for company cars.
The percentage applied will increase based on the car’s CO2 emissions. HMRC has created a handy calculator access here >> http://cccfcalculator.hmrc.gov.uk/CCF0.aspx
Company vans and fuel benefit for company cars
2019/2020 tax year Benefit in Kind (BiK) changes are as follows for company Directors and employees:
- BiK on company vans increases to £3,430 (from £3,350)
- BiK on fuel for a van provided for personal use increases to £655 (from £633).
When it comes to the fuel benefit calculation for cars things get a little more complex…
- A director/employee is provided with a company car
- Receives free fuel from their employer
- They are taxed on the cash equivalent value of the benefit each tax year
- The cash equivalent amount is fixed. In the 2019/2020 tax year this increased to £24,100 (from £23,400).
Postgraduate Master’s Loan and Postgraduate Doctoral Loan (New for 2019/2020)
Company Directors undertaking a Postgraduate Master’s will welcome a new type of loan to help with course fees and living costs. Repayments are treated in the same way as other Student Loans, and Interest is charged from the day of first payment. Repayment will be at 6% for students in England taking an income above £21,000.
Annual Investment Allowance
Businesses will be able to claim £1 million as Annual Investment Allowance (AIA) for expenditure incurred in fixed assets such as plant and machinery between 1st January 2019 and 31st December 2020.
Corporation Tax (payable on business profits) stays at 19%. The government is planning to announce a reduction of this to 17% for the 2020/21 tax year. Watch this space…
The minimum amount business owners need to pay into employee’s auto-enrolment workplace pension has increased – meaning the total amount of employer and employee contributions must now be a minimum of 8% of your employee’s qualifying earnings.
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About Oscar Fairchild:
Oscar Fairchild (incorporating Redwood Clarke since 01.09.18) is an ACCA chartered and certified and AAT qualified accountancy & bookkeeping practice with offices in The City of London and Billericay, Essex. Offering a wide range of services including Self-Assessment Services, Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses across London, Essex and Hertfordshire.