With self-assessment season over, the next big milestone is the end of the tax year, and the important job of helping our clients plan for it.
As of 6 April 2019, a raft of major tax threshold changes kicked in, and new reliefs were introduced. It’s our job to make sure you’re maximising your earnings and paying only your fair share of tax.
To do that, we need to take into account both your personal and business finances, which interact with each other in all sorts of interesting ways, even if your business operates as a limited company.
In Budget 2018, the former Chancellor, Philip Hammond, announced that the personal allowance and higher-rate threshold would be increasing to £12,500 and £50,000 respectively.
There’s no change to ISA allowances, but it’s worth being aware that the allowance for Junior ISAs is going up to £4,368.
The capital gains threshold will be increasing from £11,700 to £12,000 for individuals, and from £5,850 to £6,000 for trusts.
The residence nil-rate band, which works on top of the existing nil-rate band for people passing on family homes to direct descendants, goes from £125,000 to £150,000, giving married couples and civil partners a combined allowance of £950,000.
In terms of pensions, the lifetime allowance is set to go up, from £1,030 million to £1,055m, although it’s worth being aware that changes to income tax threshold changes mean those below the higher-rate threshold will only be able to claim 20% in relief, rather than 40%.
The main corporation tax rate is staying the same for 2019/20, at 19%, as is the VAT registration threshold, at £85,000.
There are some changes to capital allowances, however, with the annual investment allowance set to rise to £1 million for two years from 1 January 2019, offering some scope for increased investment.
Something else you’ll want to plan for is the increase in the national living wage. It applies to all employees aged 25 and over and from 1 April 2019 will be £8.21 an hour.
You may also need to think about the upcoming change to auto-enrolment pensions, which from 6 April 2019 will see employers’ minimum contribution rate rise from 3% to 5% of the employee’s qualifying earnings.
Company directors are exempt from the national minimum or living wage so you can set your salary at whatever level you like.
Many choose to take their salary at just below the national insurance primary threshold (£8,632 in 2019/20) which means they don’t have to pay tax or national insurance contributions (NICs) while still building up their state pension entitlement.
In addition, salaries count as a deductible expense, bringing down the amount of corporation tax you are liable to pay.
It’s also possible to put other members of your household on the payroll, although you should only do this if they’re undertaking a substantial amount of genuine work on behalf of the business, and earn a reasonable salary for those duties. Otherwise, you could find yourself on the wrong side of an HMRC investigation.
Get in touch
To start the process of planning your taxes for next year, or any other aspect of personal or business financial planning, contact us on 020 8643 1166. You can also read more about our personal tax service here.