Sophie Kwiatkowski provides a snapshot of some of the updates announced for the 2019/20 tax year.
Although you may be in the process of having your 2018/19 tax return completed for the 31 January 2020 deadline, we are currently in the 2019/20 tax year. This runs from 6 April 2019 to 5 April 2020.
So, what is new for the 2019/20 tax year?
Personal tax
The personal allowance is £12,500. The budget announced that the personal allowance will be frozen at £12,500 for 2020/21. The basic rate band limit has been increased to £37,500, with tax rates staying the same (basic rate is 20%, higher rate is 40% and additional rate is 45%). The lifetime allowance for pensions was increased to £1,055,000.
Employment tax
These points will be of interest if you have employees with benefits.
From 6 April 2019, the figure used as the basis for calculating the benefit for employees who receive free private fuel from the employer for company cars is increased to £24,100.
From 2020/21, there will be a new range of low-emission percentages when calculating car benefits. There is also the introduction of an ‘electric range’, which is the number of miles that is essentially the maximum distance for which the car can be driven in electric mode without recharging the battery.
There were new salary sacrifice rules that impose a cost on the taxable benefits based on the value of the amount of salary given up if this is greater than the charge that would otherwise be due.
Corporation tax
The rate of writing down allowance on the special rate pool is reduced from 8% to 6%.
There has also been a temporary increase in the annual investment allowance (AIA). For expenditure on or after 1 January 2019, the maximum AIA is increased to £1 million (previously £200,000). This means you can gain tax relief on assets purchased for your practice to a much higher value than before. This is only for a two-year period, so make the most of it.
This is just a snapshot of some of the tax updates announced, so if you want to know more on any of the points raised, speak to your accountant.
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