Posted: 22. September 2019 by: Rupert Tennant

What’s Changing for Small Business Taxes in 2020?

What’s Changing for Small Business Taxes in 2020?

sesauer September 22, 2019

Small businesses are always looking towards HMRC and their changes in terms of how taxes are paid and recorded because no one is more affected by it than a small family business. Next year there are a few big tax changes coming, and as usual, that may cause confusion with small companies.

Some of these changes are about the taxation itself while others are more about the process and most importantly, about the technology behind recording and filling for taxes. That will often cause more problems than the actual finances.

Changes to the payslip

For most employees paying their taxes is connected to earning their salary since they are taxed via a PAYE slip. There’s a change in this process, meaning that the payslip will need to contain a few new information from now on. Payslips are issued monthly to both the employee and HMRC.

The biggest change is in the fact that the payslip now needs to contain the number of hours worked that month and the hourly rate that you pay to your employees. This means that you’ll need to invest in tracking systems.

Pension contributions

There’s currently a minimum contribution that you need to make towards the pension funds of your employees. These contributions will be increase starting with the next year. At this point that contribution is set at 5 percent and starting from the next year it will be set at 8 percent.

It’s still done on a joint basis, meaning that both the employee and employer pay their portion. It’s also possible for the employer to cover both of these and for the employee to keep his or her whole salary. Of course, it’s also possible to pay more than the minimum amount.

Student loan threshold

There’s an amount called student loan repayment threshold. That means that when you earn above that amount, the loan company can take the loan repayment out of your salary. Amounts below that can’t be taken out. This is a safer way to pay out the loan because it means you get to keep more of your income and have more financial security.

For plan 1 the increase in the student loan threshold will be from £18,330 to £18,935, and those earnings will be calculated at 9 percent. . For plan 2, the threshold for post-2012 loans will rise from £25,000 to £25,725. The rate is six percent.

Minimum wage

Minimum wage is the lowest amount you can be paid for doing a job. That’s the case regardless of the type of implement you’re under, and it depends only on how old are you and your marital status. The amount increases the older you get and if you have a family.

There will be an increase overall starting with the next year due to the overall increase in the costs of living. It will be increased by 4.9% to £8.21 an hour for employees aged 25 and over, the highest recorded rise since 2016.

It has also changed for workers aged 21-24, increasing from £7.38 to £7.70 an hour. The minimum wage will also rise for those aged 18-20 from £5.60 to £6.15 an hour and from £4.20 to £4.35 for employees under 18.

Making Tax Digital

Making tax digital is the long term initiative started by the government that has a goal of making all tax records and tax payments digital. That’s first started with VAT and making VAT digital which is the most common tax in the UK and thus the most useful initiative.

Starting from 2020 it will increase and develop to other forms of taxation and other duties that taxpayers have towards the government.

Income tax rate and thresholds

The most important change that we will need to prepare for is the change in the income tax since that’s what most people pay either via PAYE or directly. There will be changes in both the rates and the thresholds for this tax.

Tax-free allowance has been increased from £11.850 to £12.500. There’s also a change in when national contributions are due; it was at £8.632, and now it’s at £8.424.


There will be a few changes for taxpayers coming up in 2020. These are something to look out for since every one of us depends on the tax code and keeping up with it. The changes will be about the payments and amounts but also about how the tax is calculated and how it’s paid.

This will start with making tax digital initiative becoming broader than it was before since it started with VAT payments only. There’s also an increase in the minimum wage and an increase in the thresholds for student loans.