With everything that’s going on due to the COVID-19 pandemic, you probably aren’t thinking too much about your tax return for the coming year.
However, as Which? recently pointed out, there are a number of changes being introduced this tax year that self-employed people and entrepreneurs need to be aware of.
One of the most important is the change in the threshold for Class 2 and Class 4 National Insurance contributions.
The threshold for Class 4 contributions in 2019/20 was £8,632 of earnings, but this is set to rise to £9,500 in the 2020/21 tax year for both employed and self-employed people. Eventually, the government intends to increase this threshold to £12,500 so that it’s inline with the personal allowance threshold for income tax.
According to Which?, the government estimates that the change in 2020/21 will mean that self-employed Brits get an average pay increase of £78 per year (which rises to £104 per year for anyone who is employed).
The Capital Gains Tax (CGT) allowance is also increasing in 2020/21, going up from £12,000 to £12,300 for individuals and representatives. For trustees of settlements, the allowance will climb from £6,000 to £6,150.
However, Entrepreneurs’ Relief is due to be slashed by 90 per cent in the coming tax year, with anyone who sells a business liable to pay ten per cent on the first £1 million of gains, and anything above this will be charged at the normal CGT rates of 10 per cent (or 20 per cent for higher-rate taxpayers).
It’s also worth noting that HMRC is doing all it can to phase out the use of paper tax returns where possible.
If you want help with your tax returns and understanding your liabilities, get in touch with a tax accountant in Milton Keynes to get the support and advice that you need.