Summary of the small business tax rates and allowances for the tax year 2019/20

Corporation Tax

  • You have to pay 19% Corporation Tax if your profit falls below £300,000.
  • If your annual profit exceeds £300,000 then you have to also pay 19% Corporation Tax. Value Added Tax (VAT)
  • You must register for VAT if your turnover in the past 12 monts is £85,000 or more.
  • If your turn over in the past 12 months is £83,000 or less, you can de-registration for VAT.

Dividend Tax

  • Dividends tax is paid at a rate set by HMRC on all dividend payments received.
  • Dividend income can receive £2,000 tax-free, no matter what non-dividend income you have.
  • Dividend basic rate is 7.5%. £0 to £37,500 on taxable income over the Personal Allowance In England.
  • The dividend higher rate is 32.5%. £37,501 to £150,000 on taxable income over the Personal Allowance In England
  • Dividend additional rate is 38.1%. Over £150,000 of taxable income.

Income Tax – Personal Allowance

  • Your personal allowance (the amount you can earn before any income becomes taxable) is now £12,500.
  • If you earn £125,000 or more, you’ll not receive a tax-free personal allowance at all

Income Tax Bands

  • Basic rate band 20% applies to income up to £50,000.
  • Higher rate band 40% applies to income from £50,001 to £150,000.
  • Upper (additional) rate band 45% applies to income of £150,000 and above.

National Insurance Contributions (NICs)

  • Company owners or if you work for one, Class 1 NICs apply.
  • Employees’ Class 1 NICs are payable at 12% on salaries received between £166 and £962 per week. Any earnings above the upper earning limit (£962) will be taxed at 2%.
  • Employers’ Class 1 NICs are payable at 13.8% on earnings above £166 per week.
  • For sole traders and partnerships, you pay Class 2 and Class 4 NICs.
  • Class 2 NICs are payable at £3.00 per week and are paid by anyone earning £6,365 or more through self-employment during the tax year.
  • Class 4 NICs are paid on profits you make as a self-employed person. The Class 4 NIC rate is 9% of annual profits between £8,4632 and £50,000, and an additional 2% on profits above £50,000 per year.

Pensions Savings Tax Relief

  • Annual allowance is £40,000.
  • Maximum tax-free lump sum is 25% of your pension pot.

Individual Savings Accounts (ISAs)

  • Overall ISA investment limit remains £20,000.

Capital Gains Tax

  • At the higher rate income tax you’ll pay 28% on your gains from residential property, and 20% on your gains from other chargeable assets.
  • At the basic rate income tax you’ll pay 18% on your gains from residential property, and 10% on your gains from other chargeable assets.
  • You’ll pay 10% if you’re a sole trader or partnership and your gains qualify for Entrepreneurs Relief.
  • Individuals have an annual Capital Gains Tax exemption of £12,500.

Capital Allowances

  • Annual Investment Allowance (AIA) is £200,000
  • First-year allowances remain at 100%.

Inheritance Tax

  • Inheritance Tax Threshold (IHT) is £325,000. Standard inheritance tax rate is 40% of anything over the £325,000 threshold.

Stamp Duty Land Tax

Stamp Duty Land Tax regime rates, now charged on a progressive basis (i.e. no longer just on the band into which the purchase price falls):

  • Up to £125,000 – no tax
  • £125,001 – £250,000 – 2%
  • £250,001 – £925,000 – 5%
  • £925,001 – £1,500,000 – 10%
  • £1,500,000 or more – 12%