The new tax year is upon us! Albeit a rocky start to the new tax year, but even Coronavirus can’t stave off its beginning.
So, here we have for you an update on things you might need to know about this new tax year, 2020/21.
Highlights
For Individuals
Income Tax, Personal Allowance and National Insurance
There isn’t much change. Recent years have seen year on year increases in the personal allowance and higher tax bands, but there is no such increase this year.
The only thing that has increased is the amount you can earn before you have to start paying national insurance – this has gone from £8,632 to £9,500.
Making Tax Digital
April 2020 was the original deadline for the introduction of making tax digital for income tax, however in April 2019 it was pushed back until at least April 2021.
There’s no new news on this one; HMRC have been trialling it for the last year or so, but as to what the rules, thresholds, regulations or anything else will be around the scheme they are yet to publish or release.
Watch this space, as soon as there’s any updates we will filter them through.
IR35
Specific for you contractors and consultants of the world; following the Coronavirus epidemic the changes to the IR35 legislation have been pushed back to April 2021.
We realise this comes too late for a lot of you that had already made the necessary arrangements with your customers, but for anyone who hadn’t finalised anything yet, there’s another year’s reprieve.
Increase in Flat Rate Working from Home
Employees who work from home and claim a flat rate for doing so; the flat rate is increasing from £4 to £6 per week.
Pensions
The adjusted income limit is increasing from £150,000 to £240,000 and threshold income limit is increasing from £110,000 to £200,000. This means fewer high earners will be affected by the tapered annual pension allowance.
The minimum reduced annual allowance is going down from £10,000 to £4,000, for anyone that who falls above the earnings mentioned above.
Entrepreneurs’ Relief
This is a big one for anyone who has used this relief in the past or plans to in the future. The lifetime limit on gains eligible for this relief is dropping from £10m to £1m for disposals made after 11th March 2020. This means gains over this limit from now on will be taxed as normal capital gains.
Landlords
As has been for the last couple of years, the amount of relief available for finance costs has reduced once more. Now 25% of finance costs (mortgage interest) is allowable in full, while 75% of that finance cost is only allowable at the basic rate.
For Businesses
Employment Allowance
One for the employers out there. There’s huge change to this one, so if you’ve applied for it in the past be sure to check out the changes, and how they might affect you.
Employment Allowance increases to £4,000, and there are conditions that need to be applied when determining if you will be able to claim it:
- The business’s total (employers secondary) Class 1 National Insurance contributions must be less than £100,000
- Connected companies will need to add together the total employers secondary Class 1 NICs for all companies to determine the point above
- Companies that exceed the De Minimis State Aid rules won’t be eligible for Employers Allowance – there is a ceiling of the total amount of state aid that a company can receive before it’s ineligible for Employers Allowance
State aid can be grants, loans, tax breaks and more.
The state aid ceilings are:
| Business Sector | Ceiling |
| Primary production of agriculture products | €20,000 |
| Fisheries and aquaculture sector | €30,000 |
| Road freight transport sector | €100,000 |
| Other, industrial (everyone else) | €200,000 |
R&D
For those businesses conducting allowable research and development, the Research & Development Expenditure Credit rate increases from 12% to 13% from 1st April 2020.
Here’s a PDF that includes some rates, allowances and supporting information: