Tax Rules to Change in 2020
A company owner and an average taxpayer alike should be aware of the changes coming to the tax code in the year to come. There are a few big changes, and they will affect your tax obligations and your finances overall.
The government, meaning HMRC has discussed these matters with the public for months or even years before they are implemented, and they have been a matter for experts to decide but also for the ordinary accountants to be informed about.
Don’t get ahead of yourself.
First of all, it’s important not to get ahead of ourselves. The rules and regulations that we will discuss here haven’t yet come to be, and they are subject to the political process. They should be put into law in the March of the following year, and since that hasn’t yet happened, it means that the rules that currently exist are in effect.
At this point, it seems like everything will go as it’s planned to, and you should start preparing for the tax changes if they affect you but have in mind that they are not in place until they are voted on.
IR35 is the most important change to the tax code that’s coming this year, and it will affect the way of payroll workers are being paid and how they are being taxed on the income that they make. This will mostly affect construction work since they are the ones who hire the most temporary workers.
The rules that are introduced here mirror the changes that are made for the off the payroll workers in the public sector in 2017. However, the industries that use these workers will take a hit.
Residential property tax
It’s another change in the tax code that will affect the ordinary person since the tax paid on owning a personal property and not just the properties that are a source of income for those who rent them. The tax relief in these cases is for those who sell their own residency, and the laws will change what is considered to be residency.
- cut in the final period of deemed occupation from 18 months to 9 months
- removal of lettings relief for periods when the owner is not also in occupation
- exemption history not transferred with property ownership to a spouse
- deemed occupation at the start of ownership to be limited to 24 months (currently concession D49)
- late claims for the nomination of the main residence clarified (currently concession D21)
Capital Gains Tax
Capital Gains Tax is also one of the taxed that you need to pay when you sell the home since that’s the tax that you’ll pay when making an income from such a sale. There will be changes with this tax as well as coming the following year.
There will be a change in letting relief which is the relief for those who both use a home as their primary residence and rent it for a while. In those cases, you don’t pay taxes on the first 40k of gains made from it.
There will be a growing focus on digitalization, and that’s not something that’s true for 2020 alone. It’s a growing concern of HMRC and a part of the long term policy of the government. It has started with the digitalization of VAT which can now only be paid digitally.
This will then go broader than VAT, and it will how most taxes are paid, starting with the most common after that – income tax. It’s mostly a better way to do it, but it will take some getting used to.
There are no direct changes in late fees this year, but HMRC has stated that they will be less tolerant in regards to it. That means that less of excuses will be accepted and that HMRC will follow your paying habits more closely.
It’s true that HMRC has made such claims before and that they haven’t really gone through with them, but it’s still a good idea to be on the lookout about this. HMRC can create a lot of trouble for you if they really want to.
There are a few changes coming to the tax code in the coming year. Some of them are prepared for a while, and others are a part of the long term change in how HMRC operates. You should be aware of these even if you have an accountant dealing with it for you.
There will be more of digitalization, and there will be more strict rules in regards to being late. At the same time, there will be less room for hiring off-payroll contractors. Residency rules will also change when it comes to how you can sell your home.