Financial year for 2019/20 began on 6th April 2019. Here is a quick refresher of changes you need to be aware of.
Personal allowance (the annual amount you can earn before paying tax) for this financial year – rises from £11,850 to £12,500. If your company has two or more Employees/Directors this will be the optimal salary for the year. Monthly Net Salary will be £1,003 per employee.
If you’re company has only one Employee/Director optimal salary will be increased to £8,632 from £8,424. This is the NI threshold. Monthly Net Salary will be £719.34 for one person companies.
Dividend allowance will remain at £2,000.
Higher Tax threshold
The starting point for paying the higher rate of tax (40% / 32.5% for Dividends) will increase from £46,350 to £50,000 in England and Wales. However, in Scotland the higher rate threshold will be reduced to £43,431 (It was £44,274 for previous financial year)
Corporation Tax rate will remain at 19% for this year. This will be reduced to 18% from 1 April 2020. Corporation tax is the tax you pay on Profits of your company for Company financial year.
Landlords can only deduct 25% of mortgage interest as an expense for this Financial year. From next Financial year Mortgage interest will not be an allowable expense when calculating rental profit for private landlords. We see huge large number of clients buying properties via company to minimise the impact of this.
Scottish Tax residents
If you reside in Scotland, you have to follow Scottish Tax table. This is bit different to rest of UK with additional “Starter rate” and “Intermediate rate”, but as contractor your main concern is “higher tax limit” of £43,43.
Please note our online portal currently does NOT show Scottish higher tax limit and as Default shows UK (except Scotland) higher tax limit of £46,350. We are working with our IT partner to resolve so please be mindful when you take Dividends.
Self Assessment returns for 2018/19
We request all our clients to complete the questionnaire on “Self Assessment” tab in our online portal. (This function not available on mobile app). We are unable to submit your individual tax return without this. Appreciate your assistance in this.
If you want further clarifications on points above please do not hesitate to contact us.