The 2020 budget: what will the changes mean for your finances?
Earlier this week the government announced a package of measures which it plans to implement in 2020, some of which were new, some of which had already been published and some of which had been leaked. Here is a round up of the main tax changes for 2020 and how they will affect your finances.
1 Fewer tax brackets
From next year, the tax office will only work with two tax brackets (it is currently four). Earnings up to €68,507 will be taxed at 37.35% while earnings over that limit will be taxed at 49.5%. As both rates have come down, a lot of people will benefit from higher net salaries.
2 Tax credits will go up
The tax credit on work and the general tax credit applied to everyone will go up, again boosting your take-home pay. People earning between €20,000 and the € 35,000 will benefit the most from the increase.
3 Electric car tax breaks
Electric cars will continue to be free from vehicle tax (motorrijtuigenbelasting) up to 2025 but next year company car drivers will pay more if they use their cars for private use. Drivers who have an electric cars with a catalogue value of under €45,000 will have to pay tax on 8% of the value of their cars rather than 4% as it was this year. More expensive electric cars will be treated the same as petrol and diesel cars, with a 22% tax rate. There are no changes for petrol or diesel cars.
Next year, the reduction in the amount of interest you pay on your mortgage from tax (hypotheekrenteaftrek) will be cut by three percentage points, taking the deduction to 46%. But this is not a new measure and will be largely offset by cuts in the home owners tax known as the eigenwoningforfait.
5 Lower value added tax
The value-added tax rate on e-books, internet-based newspapers and magazines will be cut from 21% to 9%, bringing them into line with printed paperwork. This means e-books, for example, will be cheaper.
6 Child benefits
Middle income families will be able to claim higher child benefits and new fathers will be able to take five weeks parental leave, paid at 70% of current salary.
7 Tax breaks for the self employed
The self-employed tax break will be lowered from €7,280 to €7,030 next year as the government starts a slow process of cutting the deduction down to €5,000 by 2028. This means the self employed will pay slightly more tax, although this may be offset by other changes to the income tax system.
8 No more blue envelopes?
Next year you will have to decide how you want the tax office to communicate with you – by actual post or by digital mail. You will be alerted to the change and you will always be able to change your mind at a later date.
For more information about the 2020 tax changes, do not hesitate to contact Blue Umbrella at +31 (0) 20 4687560, send an email to firstname.lastname@example.org or take a look at www.blueumbrella.nl
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