What to expect from your 2020 Tax Return

Landlords

• No longer able to claim wear and tear each year on furnished properties, replacement furnishing costs only allowed which could result in higher taxable profits
• Increased restrictions on the deduction of mortgage interest payments since April 2018 affecting higher rate tax payers and potentially affecting tax liabilities on other income
•  3% Stamp Duty Land Tax surcharge on additional properties purchased
• The option to use mileage rates will be extended to individuals operating a property business to reduce the administrative burden.

Rent a Room

• Relief of up to £7,500 per year is available where you rent a  furnished room to a lodger in a house that you also live in.

Tax on Disposals

• The first £12,000 of gain on sales of assets, such as shares or property, will be exempt from tax.
• Any excess gain will be taxed at 10% or 20% depending on what has been sold, and also whether you are a higher rate tax payer or not.
• These rates increase to 18% and 28% if the sale is of UK residential property.
• Various reliefs are available to set against gains which may reduce the charges further. We will account for these where possible.

Restricted pension annual allowance

• Up to £40,000 can be paid into a personal pension annually, more if you have unused allowances from the previous 3 years
• Where income is in excess of £150,000(from 6^th April 2020 this is increased to £240,000) the annual amount that can be invested in a pension will be restricted.
• The maximum restriction will be £30,000 ie you will still be able to pay up to £10,000 into a pension (from 6^th April 2020 this will be a maximum restriction of £36,000 ie you will still be able to pay up to £4,000 into a pension.)
• Contributions may need to be reduced or an annual allowance charge may have to be paid on 31st January if you have exceeded the combined allowances or paid in excess of your net relevant earnings.
• For more information on pensions, visit our website here.

National Insurance for sole traders

• It now forms part of the tax liability payable on 31st January each year, increasing the lump sum payable by £156.

Personal savings allowance

• Interest is not taxed at source and is instead paid gross
• As long as earning below £150,000, no tax is due on the first £1,000 of interest received, £500 for higher rate tax payers
• If your income, exclusive of savings, is below £17,500 you may also be entitled to the Starting Rate for Savings giving you up to £5,000 extra tax free allowance.

Marriage allowance

• Availability to transfer up to £1,250 of the personal allowance to a spouse if:- One party is a basic rate tax payer –
  – The other earns less than the personal allowance
•  Results in a reduction in tax of up to £250 in the tax year * Apply online at https://www.gov.uk/apply-marriage-allowance

Deferral of July 2020 payment on account

Due to the Covid-19 pandemic, HM Revenue & Customs are allowing the July 2020 payment on account to be deferred until January 2021. More information can be found here.