A number of changes have been made to the tax rules recently which may affect you, leading to your liability potentially being higher (or lower!) than expected as a result! Some of the main changes are mentioned below:
No longer any national tax deduction at source
The first £2,000 of dividends each year will be tax free which is less than the previous year
Minimum 7.5% tax charge on dividends above this
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 room to a lodger in a house that you continue to live in
Tax on Disposals
The first £11,700 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, 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 allowed to pay up to £10,000
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
This used to be paid monthly or quarterly to the National Insurance office
It now forms part of the tax liability payable on 31st January each year, increasing the lump sum payable by £153.40 in 2019 (£156 in 2020)
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 £16,000 you may also be entitled to the Starting Rate for Savings giving you up to £5,000 extra tax free 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
If you want to discuss in more detail how any of the issues above are relevant to your specific circumstances, get in touch with your client manager who will be happy to help.
Whatever issues affect you personally, the important thing is to get your tax return prepared as soon as possible after 5th April so that, whatever the outcome, you will be forewarned and will have plenty of time to plan if the end tax bill is not what you had hoped!
If you're not already signed up to the A4G Portal, we recommend that you log onto our website and get this set up now so that information for your return can be exchanged quickly and securely in both directions and we can get your tax return moving.
Give us a call on 01474 853856 for a chat about your business.