NEW TAX YEAR BRIEFING
Apr 09, 2020
The new tax year began on April 6th. Here’s a round-up of the key changes you need to be aware of for 2020/21.
Highlights
- Higher National Insurance threshold for the self-employed.
- Employment Allowance, which is a reduction in employer’s National Insurance, has increased from £3,000 to £4,000
- Working from home costs – proof required for expenses above £6 per week or £26 per month (previously £4 per week or £18 per month)
- Entrepreneur’s Relief reduced by 90%.
- VAT reverse charge for VAT-registered members of the Construction Industry Scheme (CIS) has been delayed until 1st October 2020.
- IR35 reforms have been delayed as a result of Coronavirus which means that if you’re a private sector contractor, you remain responsible for determining your IR35 status and paying the correct tax. The new rules, which mean liability moves to end hirers and employment agencies, will come into force in April 2021.
New schemes for employers, business owners and the self-employed have been introduced to alleviate the impact of the Government’s measures to stem the impact of the pandemic.
| Tax & NI Bands, England, NI & Wales | 2020/21 | 2019/20 |
| Personal Allowance | 12,500 | 12,500 |
| Employee’s NI | 9,500 | 8,632 |
| Employer’s NI | 8,788 | 8,632 |
| Higher Rate Tax Band | 50,000 | 50,000 |
| Class 2 NI | When profits exceed 6,475 | When profits exceed 6,365 |
| Class 2 NI Per Week | 3.05 | 3.00 |
| Class 4 NI | When profits exceed 9,500 | When profits exceed 8,632 |
| Tax & NI Bands, Scotland (as of 11th May 2020) | 2020/21 | 2019/20 |
| Personal Allowance | 0 – 12,500 | 0 – 12,500 |
| Starter Rate 19% | 12,501 – 14,485 | 12,501 – 14,549 |
| Basic Rate 20% | 14,586 – 25,158 | 14,550 – 24,944 |
| Intermediate Rate 21% | 25,159 – 43,430 | 24,945 – 43,430 |
| Higher Rate 41% | 43,431 – 150,000 | 43,431 – 150,000 |
| Top Rate 46% | Over 150,000 | Over 150,000 |
| National Minimum Wage/National Living Wage Rates | 2020/21 | 2019/20 |
| Apprentice Rate 1 | 4.15 | 3.90 |
| Employees Aged Under 18 | 4.55 | 4.35 |
| Employees Aged 18 – 20 | 6.45 | 6.15 |
| Employees Aged 21 – 24 | 8.20 | 7.70 |
| Employees Aged 25+ | 8.72 | 8.21 |
| Student loan repayments will be due when income reaches the following thresholds | 2020/21 | 2019/20 |
| Undergraduate Loan Plan 1 | 19,390 | 18,935 |
| Undergraduate Loan Plan 2 | 26,575 | 25,725 |
| Postgraduate Loan | 21,000 | 21,000 |
Corporation tax
Corporation tax was due to decrease from 19% to 17% on 1st April but these plans were cancelled in last month’s budget. The Government has also said the Corporation Tax will remain at 19% for the financial year 2021/22. You can find out more here.
Dividend allowance
The tax-free dividend allowance remains at £2,000 for the new tax year.
Capital Gains Tax
Capital Gains Tax allowance, the amount you can make from the increased value of your possessions before you pay tax, has increased from £12,000 to £12,300. If you make a taxable capital gain from UK residential property you will have to pay the tax you owe within 30 days of the completion of the sale instead of adding to your self-assessment tax bill.
Entrepreneurs’ Relief
Entrepreneurs’ Relief enables you to pay less capital gains when you sell or give away your company. Now, eligible individuals will pay 10% on the first £1m of gains when selling a qualifying business. Anything above £1m will be taxed at normal capital gains rates of 10% or 20% for higher-rate tax payers.
Pensions & investments
You can continue to pay a tax-free amount of £40,000 per year into a personal pension. The lifetime allowance for pension savings has increased from £1,055,000 in 2019/20 to £1,073,100 in 2020/21. There is no change to employee or employer contributions to auto-enrolment workplace pensions which remain at 5% and 3% respectively.
You can save tax-free with an ISA up to a maximum of £20,000, this limit remains unchanged from 2019/20.
Here to help
If you have any questions about the new tax year, please do get in touch. You may also find it helpful to visit the HMRC site.