As the current tax year draws to an end, self-employed businesses need to start planning for the new tax year. This guide will explain when the current tax year-ends and when the new tax year begins, as well as a year-end tax planning checklist.
In this article, we have produced a summary of the main 2020/2021 tax year changes to help guide you through the main changes that will come into force. Taking action at the start of the tax year can present you with an advantage.
When does the tax year end?
The current tax year is due to end on the 5th April, 2020, and the new 2020/2021 tax year will commence from 6th April 2020 until 5th April 2021.
Year-end tax planning checklist
There’s a lot of factors that you need to consider when planning ahead of the new tax year, which we will examine below.
Personal allowance and tax income
The basic tax-free personal allowance in the UK will remain the same (£12,500), as well as the basic 20% rate threshold for England, Northern Ireland and Wales at £37,500. Taxpayers who earn above the basic tax rate income of up to £150,000 will be governed to pay 40% income tax, and anything over will be taxed 45%.
If you are married and your spouse earns less than the personal tax allowance (12,500), then you can apply for a Marriage Allowance which will allow them to transfer 10% (£1,250) of their tax allowance to yours legally. However, please note that the Marriage Allowance is only applicable providing that neither spouse pays tax above the basic rate following the transfer.
If you’re interested in the Marriage Allowance and would like to learn more click here.
We can expect to see an increase in the Lifetime pension allowance, which is expected to rise in the new tax year from £1.055 to £1.075 m. The tax-free allowance includes all pensions and workplace pensions apart from state and overseas pensions. You won’t be taxed on your pension savings unless you exceed the Lifetime allowance or reach the age of 75 years old.
Off-Payroll in the Private Sector
The IR35 enactment is changing from April 2020. This is known as the Off-Payroll Tax, which will affect medium and large companies that employ contractors and freelancers. If contractors fall inside the off-payroll tax then they will have national insurance and PAYE deducted at the source of their income. If you would like to find out more about Off-Payroll Tax click here.
Important dates to put in your calendar for the new tax year
31st January 2020 – Date for online tax returns and is the first payment on account due
5th April 2020 – 2019/20 tax year ends
6th April 2020- Marks the first day of the new 2020 – 21 tax year
31st July 2020- Second payment on the account for income tax is due
5th October 2020 – Self-assessment registration deadline
31st October 2020 – paper tax returns are due
30th December 2020 – Deadline for online submission of self-assessment tax returns for the financial year ending 5th April 2020.
We hope that you found this information useful and if you require any assistance preparing your company taxes please take a look at or bookkeeping and taxation service. Alternatively, you can contact us on 0161 637 1080 or write to us at firstname.lastname@example.org.