Rates and Allowances
The tax-free personal allowance will remain at £12,500 for the 2020/21 tax year throughout the UK.
The basic-rate band in England, Northern Ireland and Wales will stay at £37,500 and consequently, the higher-rate threshold will continue to be £50,000.
The additional-rate band in those nations will also remain at £150,000.
In Scotland, the starter-rate rises to £14,585 and the basic-rate will increase to £25,158.
The intermediate-rate will remain at £43,430 and likewise, the higher-rate will stay at £150,000. The top rate will remain in place for income over £150,000.
INCOME TAX BANDS & RATES – ENGLAND, NORTHERN IRELAND & WALES
| Band | 2020/21 | Rate | 2019/20 | Rate |
| Personal allowance | Up to £12,500 | Nil | Up to £12,500 | Nil |
| Basic-rate | Over £12,500 to £50,000 | 20% | Over £12,500 to £50,000 | 20% |
| Higher-rate* | Over £50,000 to £150,000 | 40% | Over £50,000 to £150,000 | 40% |
| Additional-rate* | Above £150,000 | 45% | Above £150,000 | 45% |
*The personal allowance is reduced by £1 for every £2 of income from £100,000 to £125,000 (2019/20, £125,000).
NATIONAL LIVING WAGE
The national living wage applicable to over-25s increases by 6.2% from £8.21 an hour to £8.72 an hour from April 2020.
NATIONAL INSURANCE CONTRIBUTIONS
The threshold for class 1 primary contributions paid by employees and the class 4 national insurance contributions (NICs) paid by the self-employed will increase from £8,632 to £9,500 for 2020/21.
From April 2021 employers will pay no secondary class 1 NICs in relation to veterans they employ that have left regular service.
This payment holiday will last for one year from the employment commencement date.
The class 2 NICs rate for the self-employed will increase from £3.00 per week to £3.05 per week from April 2020. Class 2 NIC is payable by 31 January following the end of the tax year.
PENSION LIFETIME ALLOWANCE
The lifetime allowance for pension savings increases for 2020/21 from £1,055,000 to £1,073,100.
CAPITAL GAINS TAX
From 6 April 2020, the annual exempt amount for individuals and personal representatives will increase from £12,000 to £12,300. For trustees of settlements, the annual exempt amount will increase from £6,000 to £6,150.
DISPOSAL OF UK RESIDENTIAL PROPERTY
UK residents who sell a residential property in the UK on or after 6 April 2020 may have to report the gain and pay any capital gains tax owed to HMRC within 30 days of completion.
Letting relief
From April 2020, letting relief will only be available in circumstances where the owner of the property is in shared occupancy with the tenant.
Private residence relief
In most cases, the final period of exemption will fall from 18 months to nine months from April 2020.
PENSION TAPERED ANNUAL ALLOWANCE
From 6 April 2020, threshold income will increase from £110,000 to £200,000. The adjusted income will increase from £150,000 to £240,000 and the minimum reduced tapered allowance will be decreased from £10,000 to £4,000.
RESIDENCE NIL-RATE BAND
The residence nil-rate band for inheritance tax increases from £150,000 to £175,000 from 6 April 2020.
COMPANY VAN AND FUEL BENEFIT
From 6 April 2020, the flat-rate van benefit charge increases from £3,430 to £3,490, and the flat-rate van fuel benefit increases from £655 to £666. Any future rises will be in line with consumer price index (CPI).
A nil rate will apply to zero-emission vans that fall within the van benefit charge from April 2021.
COMPANY CAR AND FUEL BENEFIT
The car fuel benefit multiplier increases from £24,100 to £24,500 from 6 April 2020 and will rise in line with the CPI thereafter.
As previously announced, the Government will introduce new company car benefit-in-kind rates, with reductions for electric and certain hybrid cars.
Rates for cars first registered from 6 April 2020 will increase by 1% in 2021/22 and a further 1% in 2022/23. Rates will then be frozen until 2024/25.
ISAs
The adult ISA annual subscription limit remains at £20,000 for 2020/21 and will rise thereafter in line with CPI.
The junior ISA annual subscription limit and the child trust fund annual subscription limit both increase from £4,368 to £9,000 with effect from 6 April 2020.
TOP-SLICING RELIEF ON LIFE INSURANCE POLICIES
For gains made on or after 11 March 2020, any allowances and reliefs within the top-slicing relief calculation must be set as far as possible against other income in preference to the gain.
The personal allowance will be reinstated within the calculation of top-slicing relief.
Previously some taxpayers may have lost their entitlement to some or all of the personal allowance due to the gain having been included as part of their income.
LOAN CHARGE
In summary, the loan charge will:
- Apply to loans made between 9 December 2010 and 5 April 2019
- Not apply to loans made prior to the 2016/17 tax year where a reasonable disclosure had been made to HMRC.
Individuals affected by the loan charge will be able to elect to split their loan balance over the tax years 2018/19, 2019/20 and 2020/21.
In relation to 2018/19, individuals will not face any late payment penalties or interest, provided a return was filed and payment made by 30 September 2020.