Yes, it’s that time of the year again and we are fast approaching the end of the tax year on 5th April and now is usually a good time to get to grips with any tax changes. You will be surprised how much tax efficiencies and reliefs you can maximise by planning for the outgoing tax year and get your business prepared for the new tax year.
Some important steps you can take
- Have you utilized the pension relief? You can contribute up to £ 40,000 per year get claim tax reliefs on same. Even if the contributions are directly made out from your company. https://www.outsourcedacc.co.uk/blog/all-you-need-to-know-about-pension/
- Make sure you take company dividends before 5th If you have not used up your dividend allowance you can ensure you maximise this by declaring the cash dividend before the period ends.
| Dividend tax free allowances and thresholds | 2019/20 tax year | 2020/21 tax year |
| Dividend tax-free allowance | £2,000 | £2,000 |
| Personal Allowance | £12,500 | £12,500 |
| Dividend basic rate – The lowest rate of tax on dividends | 7.5% on earnings up to £37,500 | 7.5% on earnings up to £37,500 |
| Dividend higher rate – The middle tier of tax on dividends. | 32.5% on earnings above the basic rate up to £150,000 | 32.5% on earnings above the basic rate up to £150,000 |
| Dividend additional rate – The top rate of income tax for high earners. | 38.1% on earnings above £150,000 | 38.1% on earnings above £150,000 |
Please remember that these earning thresholds include all your other income so please speak to your accountant
- Get your documents and records in order. This is a good time to start getting everything ready. We strongly recommend that you should be aiming to prepare your tax returns as soon as the year ends. This way you can plan for your tax payment and reduce the next payment on account due in July if your taxes are lower than last year.
- Make sure your payroll records are correct and inform your employer if not so they are all corrected before the year end P60’ are issued to you. P60 is a very important document so you need to ensure they have safely stored. Scanning them or saving a PDF would be the best option. P60’s are used to prove your income during the year.
- Make sure you have used your ISA allowance.
Now that we have covered the current tax year lets look at some key points for the new tax year.
- With affect from 6th April 2020 the below rates will apply on your personal income
Changes to tax thresholds and rates (England & Wales)
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,500 | 0% |
| Basic rate | £12,501 to £50,000 | 20% |
| Higher rate | £50,001 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
This means you can earn up to £ 50,000 and still pay only the lower level of taxes depending on the type of income and rates.
- You will no longer receive the £ 2000 tax free dividend allowance. Instead you will start paying tax on all dividend income based on the tax band you fall
| Tax band | Tax rate on dividends over the allowance |
| Basic rate | 7.5% |
| Higher rate | 32.5% |
| Additional rate | 38.1% |
- Landlords will continue to pay tax on rental income after deducting any allowable expenses. Mortgage interest rates will now be restricted to the basic rate reduction. You will not be impacted by this change if your income is under £ 50,000 per year. You can read more about it on our blog.
https://www.outsourcedacc.co.uk/blog/mortgage-interest-relief-explained/
- You can get up to £1,000 each tax year in tax-free allowances for property or trading income from 6 April 2017. If you have both types of income, you’ll get a £1,000 allowance for each. If your annual gross property income is £1,000 or less, from one or more property businesses you will not have to tell HMRC or declare this income on a tax return.
- You may also get up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings. The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.
- Company cars and fuel rates are based on the advisory rates affective from 1st March 2020
| Engine size | Petrol – amount per mile | LPG – amount per mile |
| 1400cc or less | 12 pence | 8 pence |
| 1401cc to 2000cc | 14 pence | 10 pence |
| Over 2000cc | 20 pence | 14 pence |
| Engine size | Diesel – amount per mile |
| 1600cc or less | 9 pence |
| 1601cc to 2000cc | 11 pence |
| Over 2000cc | 13 pence |
Advisory electricity rate for fully electric cars
Amount per mile – 4 pence.
Electricity is not a fuel for car fuel benefit purposes.
Please get in touch with us if you have any questions or clarifications. We are here to help.