Employment Taxes – Spring Budget 2020

Budget 2020 Employment Taxes

The main employment tax announcements in the Spring Budget 2020 are as follows:

National Insurance Thresholds

The primary threshold which is the rate at which employees start to pay National Insurance is to increase by 10% to £9,500.

Self-employed individuals pay class 4 National Insurance. This will be payable on profits over £9,500.

The employer threshold is only to increase by inflation. Employers will pay National Insurance on their employee earnings over £169 per week. This equates to NI payable on salaries over £8,788 per annum.

As a result we calculate the optimum director’s salary to be £8,788 for the tax year 2020/21.

Employment Allowance

The employment allowance is a deduction in the employers National Insurance liability. Currently the maximum deduction is £3,000 but for 2020/21 tax year the deduction will increase to £4,000.

Employers with an employer NI bill of over £100,000 in the previous tax year will no longer qualify for this allowance.

Homeworking

Employees can currently claim a flat rate of £4 a week to cover additional household expenses if they work from home.

From April 2020 the flat rate claim increases to £6 a week (£312 per annum).

Car Benefits and Van Benefits

Cars registered after April 2020 will be taxed under a new calculation for CO2 emissions. New vehicles will have a CO2 figure based on the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). It is expected that this will produce a higher CO2 value. As a result there will be a 2% reduction in the applied benefit in kind rate for new cars only.

Zero emission cars and zero emission vans will pay a £nil rate of tax.

Other budget announcements:

Personal Taxes
Business Taxes
Capital Taxes

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