From 6th April onwards, millions of employees and self-employed people will pay less tax due to an increase in the threshold for the 2020-21 tax year. After the coronavirus pandemic fallout, are you going to be better off after the 2020-21 tax threshold changes? Here are some tax reforms you will need to learn about for 2020-2021, including new tax rates and thresholds for self-employed individuals.
2020-21 UK tax changes for the self-employed – Have you filed your self-assessment?
The government has also delayed controversial tax changes for the private sector to off-payroll working rules (known as IR35) until April 2021, to help ease the burden the coronavirus pandemic has on companies and individuals.
Threshold Rise for Self-Employed National Insurance
As part of the 2020 Budget, it has been declared that the thresholds for the 2020-21 tax year will be raised for the National Insurance Contribution (NIC). Both working and self-employed employees who pay Class 4 fees will be eligible to receive up to £ 9,500 in 2020-21. Class 2 National insurance premiums in 2020-21 are £3.05 a week (which is paid if the earnings range between £6.475 and £9.500).
Capital Gains Tax deduction and adjustments in bill payments
The allowance for capital gains tax (CGT) will increase from £12,000 to £12,300 for persons and representatives and from £ 6,000 to £6,150 for settlement trustees. CGT is a tax on the increased value of your properties during the period you owned them – such as antiques, a second home, or bonds.
Entrepreneurs’ Relief lifetime limit
If you are selling a business, there are additional reliefs available which may mean you can pay less CGT when selling or giving away your business. This is considered Entrepreneurs’ Relief. This tax exemption is set to be cut by 90 percent in 2020-2021.
The ISA tax year bonus for the year 2020/2021 remains £20,000. You may also opt to spend the maximum sum between various types of ISAs so you remain under the £20,000 threshold. But here is great news if you’re investing in a Junior ISA for the future of your children – the bonus has risen from £4,368 to £9,000.
How do you file a self-employed tax return?
Self Employed individuals will need to file a self-assessment tax return if they earned more than £1000 within the previous tax year. The current UK financial tax year runs from April 6th 2021 to April 5th 2022, making the tax year that you can now file a return for April 6th 2020 to April 5th, 2021.