Here are some tax planning ideas for the year 2019/20:
Interest Paid To Directors & Individuals
If you cannot benefit from the 0% savings band, there is still a tax advantage for the company if you are able to charge it interest.
It may be cheaper for you to borrow money from a third party than for the company to do so. The interest that you pay on a loan as a director should qualify for tax relief if the necessary conditions are met.
You can then recharge interest to the company at a commercial unsecured rate. Unless the loan is short-term, the company is required to complete form CT61 and deduct basic rate tax from interest paid to the director.
Tax relief will not be available if you incurred an overdraft or borrowed money on a credit card.
Pensions
Lifetime allowance has increased to £1,055,000. The annual allowance reduces by £1 for every £2 that exceeds the £150,000 income, for individuals with income of £210,000 or more, the allowance is reduced to a minimum of £10,000.
Individuals aged 55 and over with a defined contribution pension can choose how much to withdraw with no limit. The first 25% of each withdrawal is tax free and the remainder is taxed as income.
Employer’s NIC & Payroll
No Employers NIC on employees aged 21 & under or apprentices aged 25 and under. Salary sacrifice schemes are still available for pensions, childcare, cycle to work and ultra-low emission cars.
CGT Entrepreneur’s Relief
There are two changes to the 5% qualifying conditions for the relief from 29 October 2018:
- You must hold at least 5% of rights to distributable reserves and assets on a winding up, as well as 5% share of shares and voting rights; or
- You will be eligible for relief if you are entitled to at least 5% of the disposal proceeds on a sale of ordinary share capital of the company.
For disposals after 6 April 2019, the one-year period throughout which certain conditions must be met is extended to two years, except where the trade had ceased before 29 October 2018.
Dividends
The tax free dividend allowance is currently £2,000. Dividends that you receive above this will be taxed at 7.5% (basic rate), 32.5% (higher rate), 38.1% (additional rate).
Making Tax Digital
VAT registered businesses are required to file new MTD returns from April 2019. Landlords and unincorporated businesses don’t need to comply until at least 2020.
Offshore
Any non-domicile who has been residing in the UK for more than 15 of the past 20 tax years will become ‘deemed domiciled’ for all UK taxes. Any UK born individuals cannot retain their non-domicile status upon return to the UK.
Inheritance Tax will be charged on UK residential properties held by a non-domicile through offshore companies or trusts
Corporation Tax
The Corporation Tax remains at 19% but decreases to 17% from April 2020.