The current tax year is from 6 April 2020 to 5 April 2021.
Tax Rates and Allowances
How much Income Tax you pay in each tax year depends on:
1) How much of your income is above your Personal Allowance
The personal allowance remained the same this tax year at £12,500
This is the amount of income you don’t have to pay tax on.
2) How much of your income falls within each tax band
Please refer to tax rate bands in the table below
Marriage allowance This applies from 6 April and allows for the transfer of £1,250 of a personal allowance to a spouse or partner
Self-employed National Insurance Contribution The main rate of Class 4 NICs is 9% on profits between £8,632 and £50,000 and 2% on profits over £50,000
In 2020/2021 the tax free dividend allowance is £2,000. You can pay yourself £2,000 each year without paying any tax on it.
Corporation tax The Corporation Tax main rate is set at 19% for the financial year beginning 1 April 2020, and this will remain at this rate for the financial year beginning the 1 April 2021.
Annual Investment Allowance The annual investment allowance (AIA) has been temporarily increased to £1 million between 1st January 2019 and 31st December 2020 and is available for companies and for unincorporated businesses.
Making tax digital
One of the key changes to take effect in April 2020 is the end of the soft landing, relating to putting in place digital links across MTD software to meet the MTD for VAT requirements. Businesses will now be required to have digital links between software programs.
UK Deemed Domicile Individuals who are not domiciled in the UK will be deemed to be UK domiciled for tax purposes if they are either resident in the UK for 15 of the past 20 tax years, or if they are born in the UK with a UK domicile of origin and return to the UK having obtained a domicile of choice elsewhere
VAT Remains at 20% in 2020/2021, with the VAT Threshold also remaining at £85,000.
Audit threshold to increase for small co-operatives Your company may qualify for an audit exemption if it has at least 2 of the following:
an annual turnover of no more than £10.2 million
assets worth no more than £5.1 million
50 or fewer employees on average
IR35 and public sector Where a public sector organisation engages an off-payroll worker through their own limited company, that organisation (or the recruitment agency where the worker is engaged through that agency) will become responsible for determining whether the rules should apply, and, if so, for paying the right tax and NICs.
IHT The standard Inheritance Tax rate is 40%. It's only charged on the part of your estate that's above the threshold. Example Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
The residence nil-rate band for deaths in the following tax years will be:
£125,000 in 2018 to 2019
£150,000 in 2019 to 2020
£175,000 in 2020 to 2021
This is available when residential property is left to direct descendants.
Interest relief for landlords Landlords will be able to obtain relief as follows:
Finance cost allowed in full Finance cost allowed at basic rate Year to 5 April 2016 100% 0% Year to 5 April 2017 100% 0% Year to 5 April 2018 75% 25% Year to 5 April 2019 50% 50% Year to 5 April 2020 25% 75% Year to 5 April 2021 0% 100%