New Tax Year | new tax measures!

The 6th April kicks off a new tax year 2020/21 for income tax.

We look at some of the key changes that might affect salon and spa owners:

Have a property you rent out?

If you rent out a residential property (a lot of our Clients also have a rental property business as well as their salon), there are 3 key changes from April 2020:

1a. 30 day payment and reporting
Bad news
If you sell a residential property, you now need to report the capital gains tax (CGT) you made 30 days from the date of completion of the disposal (this didn’t used to be until the deadline of 31 January following the end of the tax year).
It means you have to pay any tax due a lot earlier than before.

1b. final period exemption
Bad news
There is a reduction in the final period exemption from 18 months to 9 months (the period where you can ignore any capital gains when you make a disposal of a rental property).
It means you have to pay more tax on the disposal.

1c. Finance costs
Bad news
The transitional rules for mortgage interest relief for individual landlords (introduced from April 2017) will finally end on 5 April 2020. Which means that the buy-to-let mortgage interest relief will be 20% of the lower of:

• interest in the tax year;
• profits of the property business in the tax year; and
• total income (excluding savings income and dividend income) which exceeds the personal allowance in the tax year.

Any excess interest instead will be carried forward to be included in the calculation for the next tax year.

Employ staff?

Employment Allowance EA
Good news
For most of our Clients, they do not have to pay the first £3,000 of employers national insurance each year under what is known as the employment allowance. For this tax year, the EA has increased from £3,000 to £4,000. Which means your payroll costs reduce.

Minimum wage levels increase
Bad news
From April, the national living wage increases.
See more here: Minimum wage increases.

National Insurance limits increase
Good news
From April, an increase in the threshold where employees and employers start paying national insurance increases.
See more here: NI limits and thresholds for 2020/21

Inheritance tax
Good news
The inheritance tax (IHT) residence nil rate band is increased to £175,000 from 6 April 2020. Taken together with the existing IHT nil rate band, an individual taxpayer will be able to leave an estate of up to £500,000 without paying IHT.