The new tax year has started and with it, as usual, comes a raft of new tax legislation that has consequences for both individuals and small businesses. But as a small business without a specialised accounting team, it can sometimes be hard to keep abreast of the new laws. That’s why we have created the below summary of laws and guidelines that may affect how you run your operation over the next 12 months.
Of course, this is taxation, so some of these are going to cost you money. But don’t be too put off, as there are some new guidelines that also create opportunities to save and streamline.
Let’s start with the changes for businesses.
As of the 6 April 2019, the benefit in kind for company cars is increasing. The amount applied to the list price of the car will now be based on its CO2 emissions, as published by the Vehicle Certification Agency. If you would like to know more about how this will work in the real world, then get in contact with us so that we can help you work out how much you might end up paying.
Company vans and fuel
The fuel you use to run a company van is another benefit in kind, if used for personal use, with benefit charges only applied to this personal use. These will be increasing from 2019, from £3,350 to £3,430 for company vans and from £633 to £655 for the fuel used for personal reasons.
This remains payable on business profits at 19% this year. But remember that the government is planning on reducing this to 17% for the next tax year.
The minimum amount that you will need to be paying into your employee’s auto-enrolment workplace pension has increased. This now means that the smallest amount you are required to be contributing to your staff pension pot is 8% of their qualifying earnings. This is up from 5% for the previous year.
Annual Investment Allowance
As of this year, businesses will be allowed to claim £1 million as Annual Investment Allowance. This will be for any expenditure incurred between 1 January 2019 and 31 December 2020, for all fixed assets such as plant machinery.
For companies with a rateable value of £51,000 or less, this will be reduced by a third between this year and March 2021.
The above are the taxes and legislation that directly affect businesses in the UK but there have also been changes to the personal allowances rates that could affect how you pay yourself and your staff, depending on your working methods and organisation.
This is the amount you can earn before paying income tax and it will be increasing from 6 April 2019 to £12,500, up from £11,850 in the previous year. For most people, this will lead to a small reduction in tax of £130 a year.
At the higher rate of taxation, which is 40%, the threshold will increase from £46,350 to £50,000. This amount also includes the increased personal allowance.
If you are a company director, then you can maximise your tax efficiency. To do so, your company should pay you a salary of £8,632. The rest should be paid in dividends of up to £41,368 in the 2019/20 tax year. Your total personal tax bill would then be £2,662.50, as long as you have no other income.
If you were to take more than this in dividends and salary then you will start to pay tax on the dividends at the higher rate, which is currently 32.5%. It is always worth speaking to an accountant to work out the best ways of maximising your tax efficiency.
The dividend allowance for the new tax year will remain at £2,000. However, as we have noted above, you can take more in dividends before paying the higher dividend tax rate thanks to the new tax thresholds.
National Minimum Wage and National Living Wage
Whilst this is not strictly speaking a tax year change, as they are simply set to go up with inflation, National Minimum Wage and National Living Wage amounts increased from 1 April 2019. The minimum hourly rate that you are required to pay your staff depends on their age and several other factors in terms of their contract.
For example, for a member of staff over 25 the amount you are required to pay has increased from £7.83 to £8.21 an hour. For an employee aged under 18, it has increased from £4.20 to £4.35. For apprentices, the amounts have gone up from £3.70 to £3.90.
As always, tax can be difficult, and when you are trying to stay on top of the million other things you need to do to run your business, staying up to date with all the above is tricky. And it’s not just that, there’s also changes in admin that you will need to do to apply these new rules that eats into your available time.
However, there is way to stay on the right side of the legislation and ensure that you are in full compliance, as well as reducing your role in making it all happen. It involves working with the right people.
Here at Together Accounting, we specialise in working with small businesses, helping them to maximise their tax potential while staying fully compliant and paying everything they owe. We work in every area of small business, from tax law to payroll, so we can be a one stop shop for all your accounting needs. You don’t have to worry about keeping up with the new tax laws every year, as we do all the hard work for you. All that’s left for you is to concentrate on running your business – in the best way you know how.
Get in touch with our team if you would like to know more about what we do.