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Chancellor Rishi Sunak has delivered the UK’s first Budget since October 2018. The Budget was delayed from its usual Autumn slot last year due to on-going Brexit negotiations. You might be wondering what Budget 2020 means for you, especially in the light of the unfolding coronavirus outbreak. Here’s a breakdown of what you need to know for the 2020-21 tax year, which starts on 6 April 2020.
Your personal allowance stays the same
Your personal tax allowance, which is the amount of income that you do not have to pay tax on, has remained the same at £12,500.
National Insurance threshold increase
The government has lifted the National Insurance (NI) threshold to £9,500, which means that if you are an employee, you will pay less in national insurance contributions (NICs). Currently, people earning between £8,632 and £50,000 pay 12% NICs. This year, if you earn more than £9,500 a year, you will be £78 better off if you are self-employed or £104 if you are employed.
Employment Allowance increase for small employers
The Employment Allowance will increase from £3,000 to £4,000. This means that eligible businesses and charities will not have to pay the first £4,000 of their Employer’s NI bill for the tax year.
Businesses with an Employer NI bill of £100,000 or more in the previous tax year will not be able to claim the allowance. It’s also worth keeping in mind that self-employed freelancers and contractors can only claim this allowance for their PAYE employees as they don’t pay Employer’s NI on their own profits.
Corporation tax will remain at 19%
Corporation tax, which UK limited companies pay on their profits, remains at 19%. This is a reverse on the promise made last year to reduce the rate to 17%. Directors to become personally liable for some HMRC debts
Draft legislation has been issued to make company directors subject to an insolvency procedure, jointly and severally liable for amounts payable to HMRC by the company in certain circumstances. Directors are not normally personally liable for HMRC debts. This has allowed some company directors to build up large tax debts and then write the whole balance off by entering insolvency. Under this new legislation, directors who do this repeatedly would become personally liable for their company’s tax debts.