31/01/2020 by Pete Bird
Newsletter February 2020
Tax changes from 6 April 2020
Inheritance Tax (IHT) remains an unpopular tax in the minds of the UK public with many considering it to be an unfair tax, as taxpayers have already paid tax on the original earnings and income and are then taxed a second time upon death. With these criticisms in mind, the Residence Nil Rate Band will be increased to £175,000 which means that along with the existing IHT Nil Rate Band, taxpayers will be able to leave estates of up to £500,000 without being liable for inheritance taxes. For estates over £2 million, this band is tapered accordingly.
Landlords and those with second properties will be hit by a number of changes.
Landlords will face the end of tax breaks on mortgage interest expenses, which have been gradually phased out since April 2017 and will come to an end in April 2020.
Changes to lettings relief will impact on taxpayers who let out second homes. The phasing out of tax relief on mortgage interest payments will hit higher rate taxpayers. As it has been replaced by a 20% tax credit, basic rate taxpayers are likely to be unaffected although changes to how mortgage income is reported through Self Assessment may push more taxpayers into a higher tax rate band.
Other changes to Capital Gains Tax (CGT) relating to property mean that from 6th April 2020, any CGT payable on property sales must be reported to HMRC within 30 days of the sale with an advance payment on the tax due at the same time. Previously, CGT would not be reportable or payable until the individual was required to file their Self Assessment tax return.
There are proposed changes to the National Insurance threshold, due to rise to £9,500 in April 2020, stating “The new government has publicly committed to improving the lot of lower-paid workers so intend to raise the threshold for National Insurance to £9,500 with a longer-term intention to raise it to the current tax threshold of £12,500”.
Also at the moment, if a person buys a property, uses it for their main residence, and then rents the property out before selling it, they are entitled to claim Principal Private Residence relief (PPR) for the final 18 months that they owned the property. However, this 18-month period will be reduced to nine months, when the changes take place. That said, anyone who is selling a property because they are moving into a care home, or who has a disability, will still be able to claim for the past 36 months of ownership.
The 2020/21 tax year begins on 6th April 2020, which is when changes to IHT, CGT and Mortgage Interest Relief will come into force.
Finally, will a spring budget affect these proposals?
DATES TO REMEMBER:
1 February 2020 - Due date for Corporation tax for companies with an accounting period ended 30 April 2019.
7 February 2020 - Due date for filing and payment of VAT for the period ended 31 December 2019, unless you submit a paper return then the date is 31 January 2020.
29 February 2020 - Ensure any tax that was due by 31 January 2020 is paid as you will incur a 5% surcharge plus interest on amounts unpaid after 29 February 2020.
19th of the Month:
Due date for postal payments of PAYE, NIC and CIS deductions and on-line filing deadline for CIS300 monthly return to HMRC.
22nd of the Month:
Due date for electronic payments of PAYE, NIC and CIS deductions to HMRC.