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New tax year 2019/20 considerations for small businesses

With Brexit and the uncertainty at No. 10, it’s becoming increasingly hard to predict what upcoming legislation will be enforced and when – leaving businesses, landlords and the self-employed all striving for clarity.

tax year 2019/20 considerations

The team at GoSimpleTax have put together this guide to support those wanting to stay compliant in the new tax year.

Study the Spring Statement 2019

On the 13th March, The Chancellor of the Exchequer’s Spring Statement was unveiled to shape economic forecasts and provide a basis for government spending. In it, Philip Hammond pledged several aims that were intended to support businesses. The HM Treasury has published a summary and the full speech, and it’s worth keeping abreast of the announcements to plan ahead for the future.

One such topic was a tougher stance on late payments, with Hammond saying: “we will require company Audit Committees to review payment practices, and report on them in their Annual Accounts.” This is designed to help freelancers and SMEs in particular – two groups that are typically not paid on time by bigger corporations. It is rumoured that late payments will result in fines, but further details are to be released in due course. While this is not as significant as the tighter IR35 legislation, it does continue the trend of business owners becoming more culpable for contractors.

Be conscious of pension’s contributions

As pension payments have previously been in the Chancellor’s firing line when trying to make room for NHS spending, it may be no surprise to see contributions for higher earners be restricted further. Therefore, stay alert to any changes in policy that could affect your contribution and harm your finances.

Secondly, as of April 2019, business owners now have to contribute more to pensions through auto-enrolment. However, this doesn’t just concern employers – employees will also be facing steeper contributions. The minimum total auto-enrolment payment has increased to 8% of an employee’s pre-tax salary, and employers will need to raise their payment to a minimum of 3% of employees’ salaries with the employee contributing the remaining 5%.

Stay aware of changes to residential property lettings

2019 is a huge year for landlords, with changes set to affect everything from tenant fees to legislation designed to tackle slum property owners. The exact details of how the Tenant Fees Bill will affect landlords in spring 2019 is yet to be released, however, it could result in less property owners letting through an agency due to cost.

At this point in time, 50% of finance costs can be offset against rental income and the other 50% is relievable at the basic rate of tax (20%). From 6th April 2019, only 25% of costs will be relievable at the marginal rate and 75% at the basic rate. From 2020, there will be no offset and all finance costs will be relievable at 20%.

Prepare for National Insurance changes

Lastly, NIC thresholds will soon be changing. Currently, Class 1 National Insurance contributions stand at £8,424. However, this figure will be increasing to £8,632 following the upcoming changes. Therefore, provided you earn below £50,000, you will pay 12% of your earnings towards the above contribution – earn above and you will be charged an additional 2%.

Classified as self-employed? You may be required to pay Class 2 and 4 rates instead. Class 2 contributions are typically due on earnings that are more than £6,205 – at £3 per week – whereas Class 4 contributions are due on income exceeding £8,632 and equate to 9% of your total earnings.

More on tax rates and allowances for 2019/20 and small business tax.

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