There are always tax and other financial changes to get to grips with when the new tax year starts on 6thApril. Let’s take a look at how these changes might affect your earnings…
PERSONAL TAX THRESHOLDS
For employees, the personal tax allowance will increase from £11,850 to £12,500. For most people, this means a small reduction in tax of £130 per year.
Higher rate tax payers will now start to incur 40% tax on earnings over £50,000, rather than £46,350.
If you are a company Director, your tax efficiency can be maximised if your company pays you a salary of £8,632 and dividends of up to £41,368; giving you a tax bill of £2662.50. Earning more than this will trigger tax on the dividends at a rate of 32.5% . Use this [Insert Personal tax estimator here} for a calculation tailored to your earnings.
BENEFITS IN KIND
Those who benefit from a company vehicle and/or fuel allowance should be aware of the following changes this tax year:
The percentage of tax applied to the list price of a company vehicle will increase based on its CO2 emissions. These are published by the Vehicle Certification Agency [insert weblink]. Check out HMRC’s Ready Reckoner to calculate your company vehicle tax [insert weblink].
If your company allows personal use of a company van, or pays for fuel that you have used personally, it is classed as a Benefit in Kind (BiK). The BiK on a company van will increase from £3,350 to £3,430, while the BiK on fuel provided for personal use of a van will increase to £655 (previously £633).
The fuel benefit calculation for company cars is not quite as simple. A director / employee who drives a company car and also receives fuel is taxed on the cash equivalent value of the benefit each tax year. The fixed cash equivalent amount is £24,100 this tax year (an increase from £23,400).
The Benefit in kind charge is calculated by using an appropriate percentage, which is the same as the rate for company car benefit, and then multiplying by the fixed amount (so £24,100 in 2019/20). So if the BiK percentage for your company car is 13%, your BiK amount on the fuel provided for personal use is £3,133 (13% of £24,100).
From 6thApril 2019, the earnings threshold before you start to repay a student loan will be as follows:
PLAN 1 LOANS – Rising to £18,935 (from £18,330)
PLAN 2 LOANS – Rising to £25,725 (from £25,000).
Directors being paid a salary & dividends and paying back a student loan must remember that the threshold for repayment is based on their total income.
This will apply to all current and future student loans where employers make student loan deductions, so it is important for those running a payroll for employees who have student loan deductions, to ensure that they have a record of what type of loan they have, so that the correct deduction are made.
OTHER PERSONAL TAX RELIEFS AND ALLOWANCES
The tax-free amount you can pay into your pension remains at £40,000 per tax year. The lifetime allowance for pension savings increases from 6thApril 2019 to £1,055,000 (from £1,030,000)
CAPITAL GAINS TAX
The capital gains tax annual exempt amount for individuals increases to £12,000 (from £11,700).
Entrepreneurs’ relief from 6thApril 2019, the minimum period throughout which the qualifying conditions for Entrepreneurs’ Relief must be met will be extended from 12 months to 24 months.
CORPORATION TAX, WORKPLACE PENSIONS AND ALLOWANCES
Corporation tax payable on business profits remains at 19%. The Government plans to reduce this to 17% next tax year (on 6thApril 2020).
WORKPLACE PENSIONS (auto-enrolment)
From 6thApril 2019, the total amount of employer and employee contributions must be a minimum of 8% of your employee’s qualifying earnings.
ANNUAL INVESTMENT ALLOWANCE (AIA)
Companies will be able to claim £1 million as AIA for expenditure incurred between 1st January 2019 and 31st December 2020 on fixed assets such as plant and machinery.
Business rates for companies with a rateable value of £51,000 or less will be reduced by a third between 6th April 2019 and 31st March 2021.
With the new tax year upon us, why not give us a call to discuss the ways your business could be more tax efficient.
Thanks for stopping by,