Every year, we see a whole range of new tax and financial changes being introduced, with many being announced in the annual Finance Bill and Autumn Budget.
But whilst these stories may dominate the headlines, 2020 does see the arrival of many new changes, including National Insurance and holiday pay, many of which have been planned for some time.
For more information on what you can expect in 2020, take a look at some of the upcoming financial and tax changes you should be aware of.
Increase in National Insurance Thresholds
In their 2019 manifesto, the Conservatives pledged that they would not raise National Insurance throughout the next parliament. Additionally, they are promising to cut tax for UK workers by increasing the National Insurance threshold.
The current threshold is £8,632 and the pledge would increase this to £9,500, saving the average worker around £85 per year. The party has suggested that the ultimate aim would be to increase this threshold to £12,500 over time.
Private Sector Reform of IR35
From 6th April, the new off-payroll working (IR35) rules will come into force, affecting any contractors working for a Personal Service Company (PSC). This change was announced in the 2018 Budget after coming into force within the public sector in April 2017.
From this date, the fundamental change happening is that instead of contractors determining their own status, the entity that is paying them will need to ascertain whether or not IR35 applies. If they find it does not apply, the contractor will be taxed at the source as an employee would be.
This will mean more administrative work for large companies that use these contractors and some fear it could lead to larger companies cutting ties with contractors and bringing more work in-house.
On the 7th January, Chancellor Sajid Javid announced that there would be a review into the new rules following concerns raised, this could conclude as early as February.
Increases to the National Minimum Wage & National Living Wage
The rates of National Minimum Wage (NMW) and National Living Wage (NLW) are changed every April. This year, UK workers are seeing a larger increase than usual, with the hourly rate rising from between 25p to 51p dependant on age. The rate increases are as follows:
|25 +||21 – 24||18 – 20||Under 18||Apprentice|
Changes to Holiday Pay
From the 6th April 2020, big changes are coming to the way that holiday pay is calculated for workers who do not work regular hours.
Currently, the rate of holiday pay is calculated based on the worker’s average weekly pay over the previous 12 weeks, however, this can mean workers miss out on holiday pay if they take their annual leave in the 12 weeks after a quiet period.
To make holiday pay fairer, employers will now need to calculate holiday pay based on the worker’s average weekly pay over the previous year.
Be Prepared for 2020 With FCF
If you run your own business, it can be challenging to keep on top of ever-changing and complex legislation. At FCF, we help simplify accounting and payroll for businesses of all sizes, with a friendly team dedicated to making your life easier.
For more information about our services, or to book your free initial consultation with a member of our team, give us a call today on 0117 379 0810.
- Coronavirus Job Retention Scheme Extended as Second Lockdown Announced - November 4, 2020
- Updates – Coronavirus Business & Self-Employed Support - September 23, 2020
- The Job Retention Bonus – What You Need to Know - July 15, 2020
Categorised in: Industry News
This post was written by Steph Roffey