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 £12,500. 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A higher marginal tax rate may be payable between £100,000 and £125,000 when the personal allowance is gradually withdrawn.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 £1,250 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.
All companies making profits in the UK pay the main rate of corporation tax at 19% in 2019/20.
On one hand, a promise to reduce the main rate of corporation tax from 19% to 17% from 1 April 2020 has been legislated for. On the other hand, the Government has pledged to shelve this planned increase to keep the main rate of corporation tax at 19% for 2020/21.
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.
Making the most of the annual pensions allowance is a particularly attractive option for higher earners.
Personal tax relief applies on pension contributions made by individuals, contributions paid by an employer will be an allowable expense for corporation tax purposes, the amount payable into a pension may be restricted by the annual allowance or net relevant earnings.
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.
Year End Tax Guide 2019/20
From help and advice on frequently asked questions to detailed summaries of the tax rates, our Year End Tax Guide is a good resource to help ensure you are doing everything to be working tax efficiently.Download for free
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