Feeling the pinch after the holiday break, or are you enjoying your year-end bonus? Here is a round up of the main tax changes for 2020 and how they will affect your finances.

1 Fewer tax brackets
From this year, the tax office will only work with two tax brackets (it was 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 in work will go up, again boosting your take-home pay. People earning between €20,000 and the €35,000 will benefit most from the increase. In total, experts think the tax and credit changes will see average salaries rising by around 2%, excluding any pay rise.

3 Electric car tax breaks
Electric cars will continue to be free from vehicle tax (motorrijtuigenbelasting) up to 2025 but next year electric company car drivers will pay more if they use their cars for private use. Drivers who have an electric car with a catalogue value of under €45,000 will have to pay tax on 8% of the value of their car, 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.

4 Tax breaks on bikes
The government is also working to simplify the rules attached to company bikes and e-bikes. From January, if your employer provides you with a bike, you will no longer have to keep a record of the number of kilometres you travel. Instead you will need to add 7% of the recommended retail price of a new bike to your taxable income, as a perk.

5 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.

6 Tax allowances for the self employed
The self-employed tax allowance 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.

7 Study expenses
2020 will probably be the last year you can claim your study expenses as a deduction in your income tax. From 2021 onwards the Dutch government will offer grants for people to attend some courses, rather than given them a tax break.

8 Small businesses and VAT
On 1 January 2020, Dutch VAT (btw) rules for small businesses (in Dutch kleine ondernemersregeling) will be amended. At the moment, small business owners may qualify for this scheme if they have to pay less than €1,883 in VAT per calendar year.

The new rule focuses on turnover rather than VAT. Small business owners with a maximum turnover of € 20,000 per annum will be able to apply for the exemption and won’t have to charge VAT. This does, of course, mean that they will not be able to claim any VAT they pay, either.

For more information about the 2020 tax changes, do not hesitate to contact Blue Umbrella at +31 (0) 20 4687560, send an email to info@blueumbrella.nl or take a look at www.blueumbrella.nl