As the end of the tax year approaches there are various rules, rates and allowances in place which if used effectively can ensure you are working in the most tax efficient way.
This is why we have created a Year End Tax Guide which covers the following topics from personal allowances and reliefs through to penalties and upcoming charges.
Personal Allowances and Reliefs
The personal allowance for the current tax year is £11,850. Non-savings income above the personal allowance is taxed at rates from 20% to 45% (or 19% to 46% in Scotland).
A higher marginal tax rate may be payable between £100,000 and £123,700 when the personal allowance is gradually withdrawn. This gives an effective marginal rate of 60% (61.5% in Scotland) in this band for non-savings and savings income.
You may be able to transfer £1,190 of your personal allowance to your spouse or civil partner if neither of you is a higher-rate taxpayer.
Generally speaking, it is relevant when one spouse or civil partner is not able to use all of their personal allowance.
Corporation Tax
The main rate of corporation tax is 19% until 31 March 2020. From 1 April 2020, this rate reduces to 17%. Corporation tax self-assessment requires companies to work out their own tax liability as part of their return and account for the ‘self-assessed’ liability to corporation tax.
Business Deductions
Business owners are entitled to claim deductions from income for costs which are incurred wholly and exclusively in running the business. Determining how this rule applies in practice can be a challenge. In most circumstances, a deduction may not be claimed in respect of depreciation.
However, deductions in the form of capital allowances are available for some expenditure on qualifying capital expenditure.
Penalties
The penalty regime covers income tax, corporation tax, VAT and inheritance tax. Miss the first income tax return filing deadline and the next day you will be liable for a £100 fine. Leave it for another three months and the maximum penalty rises by £10 a day, up to a maximum of £900. After six months a further £300 or 5% of the tax due – whichever is the higher – is added.
In some serious cases the penalty can be even higher than this. There are also penalties to cover the notification of starting a business and filing returns and accounts at Companies House. Penalty rates range from £150 for a private company filing the accounts not more than one month late, up to £7,500 for a public company filing accounts more than six months late.
For all you need to know and more importantly how to incorporate these when it comes to planning ahead download the full guide here.
For any other questions or queries contact our Tax Team on 0161 923 0201.
