Changes for the New Tax Year 2020-21
The new tax year 2020-21 commenced on 6th April 2020 with changes to tax allowances, thresholds, business rates and more. The measures announced in the Spring Budget that were designed to help businesses cope with the effects of COVID-19 are also now being implemented.
We’ve rounded up some of the most important changes for businesses in 2020/21 and more information can be found on the HRMC website.
Personal Tax Allowances and Thresholds
The amount you are allowed to earn each year before paying tax, also known as the Personal Tax Allowance remains the same in the new 2020-21 tax year at £12,500. The higher rate income tax threshold also stays the same at £50,000.
For directors who also pay themselves in dividends, the dividend allowance remains at £2000.
The National Minimum Wage
The National Minimum Wage is the minimum pay per hour that almost all workers are entitled to by law. The minimum wage rates applied from 1st April 2020 are as follows
|Category of worker||Hourly Rate|
|Aged 25 & above (national living wage rate)||£8.72|
|Aged 21 to 24 inclusive||£8.20|
|Aged 18 to 20 inclusive||£6.45|
|Aged under 18 (but above compulsory school leaving age)||£4.55|
|Apprentices aged under 19||£4.15|
|Apprentices aged 19 and over, but in the first year of their apprenticeship||£4.15|
To check if you’re paying your workers the National Minimum Wage or to see f you owe them payments from previous years, use the National Minimum Wage calculator.
Benefit in Kind – Company cars & Fuel taxes
Benefit in Kind tax rates have increased for the new tax year 2020-21, affecting the amount of tax owed on company cars. The percentage of tax owed is based on the CO2 emissions published by the Vehicle Certification Agency and HMRC has created a ready reckoner to help you calculate your company car tax.
The amount of tax owed on fuel or company vehicles used for personal use has also increased in the new tax year. For vans, the BiK rate is a fixed charge as follows;
- The Benefit in Kind rate on company vans goes up to £3,490 (from £3,430)
- The Benefit in Kind rate on fuel for a van provided for personal use increases from £655 to £666.
The tax on free fuel provided by an employer for use in a company car has also risen. This amount is calculated and fixed on the cash equivalent of the benefit each tax year; the fixed amount has gone up from £24,100 to £24,500 for the tax year 2020-21.
As mentioned in the Spring Budget, to help businesses struggling with the effects of coronavirus, businesses in the retail, leisure and hospitality sectors working from a property with a rateable value of less than £51,000 will not have to pay any business rates in the year 2020-21.
For pubs, the discount they are eligible to receive on their business rates will increase from £1,000 to £5,000 as long as their rateable value is below £100,000.
Whatever the new tax year brings for your business, using Sage 50cloud Accounts will help you to keep on top of your finances. Contact us to get started with Sage accounting software to manage your business accounts.