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- Introduction
- Income Tax
- Pensions
- Annual investment limits
- National Insurance Contributions
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- Capital Gains Tax
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- Main capital allowances
- Property Taxes
- Value Added Tax
- Inheritance Tax
- Key dates and deadlines
- Useful rates
Introduction
Annual changes to different tax rates, thresholds and allowances can affect the tax bills of both individuals and businesses. Therefore, it is mandatory for individuals and businesses to be aware about the tax rates, thresholds and allowances for the current tax year i.e. 2020-21.
Working out taxes is a complex affair and it is not possible for everyone to work out the correct amount of tax as there are many things which you need to take into consideration before filing your tax returns. Information about tax rates, thresholds and allowances not only prepares you to better manage your finances but also helps in working out the correct amount of tax liability for the current year. In order to get proper guidance and to know how much effect they will put on your tax bill - Refer to all the tax rates, thresholds and allowances for the tax year 2020-21 below.
Income Tax
| Allowances | 2020/21 | 2019/20 |
|---|---|---|
| Personal Allowance (PA)* | £12,500 | £12,500 |
| Marriage Allowance† | £1,250 | £1,250 |
| Blind Persons Allowance | £2,500 | £2,450 |
| Rent a room relief** | £7,500 | £7,500 |
| Trading income** | £1,000 | £1,000 |
| Property income** | £1,000 | £1,000 |
*PA is withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There is no allowance given above £125,000.
† The part of the PA that is transferable to a spouse or civil partner who is not a higher or top rate taxpayer.
** If gross income exceeds it, the limit may be deducted instead of actual expenses.
| Rate bands | 2020/21 | 2019/20 |
|---|---|---|
| Basic Rate Band (BRB) | £37,500 | £37,500 |
| Higher Rate Band (HRB) | £37,501 – £150,000 | £37,501 – £150,000 |
| Additional rate | over £150,000 | over £150,000 |
| Personal Savings Allowance (PSA) | ||
| – Basic rate taxpayer | £1,000 | £1,000 |
| – Higher rate taxpayer | £500 | £500 |
| Dividend Allowance (DA) | £2,000 | £2,000 |
BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.
| Tax rates | 2020/21 and 2019/20 | ||
|---|---|---|---|
| Rates differ for General/Savings/Dividend income | G | S | D |
| Basic rate | 20% | 20% | 7.5% |
| Higher rate | 40% | 40% | 32.5% |
| Additional rate | 45% | 45% | 38.1% |
General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (interest). Scottish taxpayers are taxed at different rates on general income (see below).
To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.
The PSA taxes interest at nil, where it would otherwise be taxable at 20% or 40%.
Dividends are normally taxed as the ‘top slice’ of income. The DA taxes the first £2,000 of dividend income at nil, rather than the rate that would otherwise apply.
| Income tax – Scotland | 2020/21 | 2019/20 | |
|---|---|---|---|
| Starter rate | 19% | £2,085 | £2,049 |
| Basic rate | 20% | £2,086 – £12,658 | £2,050 – £12,444 |
| Intermediate rate | 21% | £12,659 – £30,930 | £12,445 – £30,930 |
| Higher rate | 41% | £30,931 – £150,000 | £30,931 – £150,000 |
| Top rate | 46% | over £150,000 | £150,000 |
The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.
High Income Child Benefit Charge (HICBC)
1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.
| Remittance basis charge | 2020/21 | 2019/20 |
|---|---|---|
| For non-UK domiciled individuals who have been UK resident in at least: |
||
| 7 of the preceding 9 tax years | £30,000 | £30,000 |
| 12 of the preceding 14 tax years | £60,000 | £60,000 |
| 15 of the preceding 20 tax years | Deemed to be UK domiciled | |
Pensions
| Registered Pensions | 2020/21 | 2019/20 |
|---|---|---|
| Lifetime Allowance (LA) | £1,073,100 | £1,055,000 |
| Annual Allowance (AA)* | £40,000 | £40,000 |
Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.
*Usually tapered down, to a minimum of £4,000 (2019/20: £10,000), when adjusted income exceeds £240,000 (2019/20 £150,000).
| State pension (per week) | 2020/21 | 2019/20 |
|---|---|---|
| Old state pension – Single person | £134.25 | £129.20 |
| Old state pension – Married couple | £214.75 | £206.65 |
| New state pension† | £175.20 | £168.60 |
†Applies to those reaching state retirement age after 5 April 2016.
Also See: Can I make pension contributions through my limited company?
Annual investment limits
| 2020/21 | 2019/20 | |
|---|---|---|
| Individual Savings Account (ISA) | ||
| – Overall limit | £20,000 | £20,000 |
| – Lifetime ISA | £4,000 | £4,000 |
| Junior ISA | £9,000 | £4,368 |
| EIS – 30% relief | £2,000,000 | £2,000,000 |
| Seed EIS (SEIS) – 50% relief | £100,000 | £100,000 |
| Venture Capital Trust (VCT) – 30% relief | £200,000 | £200,000 |
National Insurance Contributions
Class 1 (Employees)
| Employee | Employer | |
|---|---|---|
| Main NIC rate | 12% | 13.8% |
| No NIC on first | £183pw | £169pw |
| Main rate charged up to* | £962pw | no limit |
| 2% rate on earnings above | £962pw | N/A |
| Employment allowance per business** | N/A | £4,000 |
*Nil rate of employer NIC for employees under the age of 21 and apprentices under 25, up to £962pw.
**Some businesses do not qualify, including certain sole director companies and employers who have an employer’s NIC liability of £100,000 or more for 2019/20.
Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).
Class 2 (Self employed)
| Flat rate per week | £3.05 |
| Small profits threshold | £6,475 |
Class 3 (Voluntary)
| Class 3: Flat rate per week | £15.30 |
Class 4 (Self employed)
| On profits £9,500 – £50,000 | 9.0% |
| On profits over £50,000 | 2.0% |
Vehicle benefits
Cars
Taxable benefit: List price multiplied by chargeable percentage.
| 2020/21 percentage for petrol cars first registered | |||
| CO2 emissions g/km |
Electric range Miles |
Pre 06.04.2020 % |
Post 05.04.2020 % |
|---|---|---|---|
| 0 | N/A | 0 | 0 |
| 1-50 | >130 | 2 | 0 |
| 1-50 | 70 - 129 | 5 | 3 |
| 1-50 | 40 - 69 | 8 | 6 |
| 1-50 | 30 - 39 | 12 | 10 |
| 1-50 | <30 | 14 | 12 |
| 51-54 | N/A | 15 | 13 |
Then a further 1% for each 5g/km CO2 emissions, up to a maximum of 37%. Diesel cars that are not RDE2 standard suffer a 4% supplement on the above figures but are still capped at 37%.
Vans
Chargeable value of £3,490 (2019/20: £3,430) if private use is more than home-to-work. Electric vans £2,792 (2019/20: £2,058).
Fuel
Car: CO2-based percentage from above table multiplied by £24,500 (2019/20: £24,100).
Van: £666 (2019/20: £655).
Employee contributions do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).
Also See: Vehicle & Car Tax – Tax Rates
Tax-free mileage allowances
| Employees own transport | per business mile |
|---|---|
| Cars first 10,000 miles | 45p |
| Cars over 10,000 miles | 25p |
| Business passengers | 5p |
| Motorcycles | 24p |
| Bicycles | 20p |
Also See: How to claim VAT on mileage expenses?
Capital Gains Tax
| 2020/21 | 2019/20 | |
|---|---|---|
| Annual exemption amount | ||
| Individuals, estates | £12,300 | £12,000 |
| Most trusts | £6,150 | £6,000 |
| Tax rate | ||
| Individual (to basic rate limit)* | 10% | 10% |
| Individual (above basic rate limit)* | 20% | 20% |
| Trusts, estates* | 20% | 20% |
| Entrepreneurs Relief (ER)** | 10% | 10% |
| Investors’ Relief (IR)*** | 10% | 10% |
*Individuals are taxed at 18%/28% on gains on residential property and receipts of carried interest. Trusts and estates are taxed at 28% in these circumstances.
**ER is available for lifetime gains of up to £1m (£10m for disposals pre 11.3.20). Qualifying disposals include a trading business and shares in a trading company (from a minimum 5% holding) by an officer/employee. Various conditions apply.
***Shares in an unquoted trading company may qualify for IR on lifetime gains up to £10m, if acquired by someone who is not a paid officer or employee of the company and disposed of after 5.4.19. Various conditions apply.
Also See: Capital Gains Tax Calculator – How to calculate?
Corporation Tax
| Year to | 31.3.2021 | 31.3.2020 |
|---|---|---|
| Corporation Tax rate | 19% | 19% |
| Research and development relief | ||
|---|---|---|
| SME enhanced expenditure deduction scheme* |
130% |
130% |
| Large company R&D Expenditure Credit (RDEC) scheme** |
13% |
12% |
*Additional deduction for qualifying R&D
**Taxable expenditure credit for qualifying R&D
SMEs that make losses can surrender the deduction to HMRC in exchange for a payment of 14.5% of the loss.
Also See: Capital Gains Tax Calculator – How to calculate?
Main capital allowances
| Plant and machinery allowances | Rate | |
|---|---|---|
| Annual Investment Allowance (AIA) | ||
| – expenditure 1.1.19 - 31.12.20 | £1,000,000 | 100% |
| – expenditure pre 1.1.19 and post 31.12.20 | £200,000 | 100% |
| Energy/water-efficient equipment bought pre 1/6 April 2020 | 100% | |
| Writing down allowance: general pool (reducing balance) | 18% | |
| Writing down allowance: special rate pool (reducing balance)* | 6% | |
| Motor cars purchased | |||
|---|---|---|---|
| From 1.4.18 CO2 (g/km) |
1.4.15 to 31.3.18 CO2 (g/km) |
Allowance | |
| New cars only | up to 50 | up to 75 | 100% |
| In general pool | up to 110 | up to 130 | 18% pa |
| In special rate pool | above 110 | above 130 | 6% pa |
| Structures and buildings allowance | |
|---|---|
| From 29.10.18 to 31.3.20 (companies) or 5.4.20 (others) | 2% |
| From 1.4.20 (companies) or 6.4.20 (others) | 3% |
Property Taxes
Annual Tax on Enveloped Dwellings (ATED)
ATED applies to ‘high value’ residential properties owned via a corporate structure, unless the property is used for a qualifying purpose. The tax applies to properties valued at more than £500,000.
| Property value | Annual charge to | |
|---|---|---|
| 31.3.2021 | 31.3.2020 | |
| 0.5m - 1m | £3,700 | £3,650 |
| 1m - 2m | £7,500 | £7,400 |
| 2m – 5m | £25,200 | £24,800 |
| 5m – 10m | £58,850 | £57,900 |
| 10m – 20m | £118,050 | £116,100 |
| Over 20m | £236,250 | £232,350 |
Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT)
| Residential property (1st property only) | |||||
|---|---|---|---|---|---|
| SDLT - England & NI £000 |
Rate | LBTT - Scotland £000 |
Rate | LTT - Wales £000 |
Rate |
| Up to £125 | Nil | Up to £145 | Nil | Up to £180 | Nil |
| £125 - £250 | 2% | £145 – £250 | 2% | £180 – £250 | 3.5% |
| £250 – £925 | 5% | £250– £325 | 5% | £250 – £400 | 5.0% |
| £925 – £1,500 | 10% | £325 – £750 | 10% | £400 – £750 | 7.5% |
| Over 1,500 | 12% | Over £750 | 12% | £750 – £1,500 | 10.0% |
| Over £1,500 | 12.0% | ||||
A supplement applies for all three taxes where an additional residential property is purchased for more than £40,000 (unless replacing a main residence). It is also payable by all corporate purchasers. The rate is 3% (LBTT: 4%) of the total purchase price.
For SDLT:
– First-time buyers purchasing a property of up to £500,000 pay a nil rate on the first £300,000 of purchase price.
– A rate of 15% may apply to the total purchase price, where the property is valued above £500,000 and purchased by a ‘non-natural person’ (e.g. a company).
For LBTT, first-time buyer relief increases the nil rate band to £175,000.
| Non-residential or mixed use property | |||||
|---|---|---|---|---|---|
| SDLT - England & NI £000 |
Rate | LBTT - Scotland £000 |
Rate | LTT - Wales £000 |
Rate |
| Up to £150 | Nil | Up to £150 | Nil | Up to £150 | Nil |
| £150 – £250 | 2% | £150 – £250 | 1% | £150 – £250 | 1% |
| Over £250 | 5% | Over £250 | 5% | £250 – £1,000 | 5% |
| Over £1,000 | 6% | ||||
Also See: Pay Capital Gains Tax on Residential Property in 30 Days
Value Added Tax
| Standard rate (1/6 of VAT-inclusive price) | 20% |
| Registration level from 1.4.2017 | £85,000 per annum |
| Deregistration level from 1.4.2017 | £83,000 per annum |
Most businesses above the registration threshold must comply with the Making Tax Digital requirements.
Flat Rate Scheme (FRS)
| Annual taxable turnover to enter scheme | Up to £150,000 |
| Must leave scheme if annual taxable turnover | Exceeds £230,000 |
If using FRS, the VAT paid by the business is a fixed percentage (based on business category) of FRS turnover rather than the net of output tax over input tax. Input tax is usually not recoverable.
Cash accounting and Annual accounting schemes
| Annual taxable turnover to enter scheme | Up to 1.35m |
| Must leave scheme if annual taxable turnover | Exceeds 1.60m |
Option to tax property
Notify HMRC within 30 days.
Inheritance Tax
| 2020/21 | 2019/20 | |
|---|---|---|
| Nil rate band (NRB)* | £325,000 | £325,000 |
| NRB Residential enhancement (RNRB)†* | £175,000 | £150,000 |
| Tax rate on death** | 40% | 40% |
| Tax rate on lifetime transfers to most trusts | 20% | 20% |
†RNRB is available for transfers of a main residence to (broadly) direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m.
*Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB band may be claimed to increment the current NRB and RNRB when the survivor dies.
**Rate reduced to 36% if at least 10% of the relevant estate is left to charity. Unlimited exemption for transfers between spouses/civil partners, except if UK domiciled transferor and foreign domiciled transferee, where maximum exemption £325,000.
100% Business Property Relief (BPR) for all shareholdings in qualifying unquoted trading companies, qualifying unincorporated trading businesses and certain farmland/buildings.
Also See: HMRC Inheritance Tax UK
Reduced tax charge on gifts within 7 years before death
| Years before death | 0-3 | 3-4 | 4-5 | 5-6 | 6-7 |
| % of full death tax charge payable | 100 | 80 | 60 | 40 | 20 |
Annual exemptions for lifetime gifts include £3,000 per donor and £250 per recipient.
Key dates and deadlines
| Payment dates | |||
|---|---|---|---|
| Self assessment | 2020/21 | 2019/20 | |
| 1st payment on account | 31 January | 2021 | 2020 |
| 2nd payment on account | 31 July | 2021 | 2020 |
| Balancing payment | 31 January | 2022 | 2021 |
| Capital Gains Tax*† | 31 January | 2022 | 2021 |
*UK residential property 2020/21: CGT due within 30 days of completion.
†Non-residents with gains on any UK land and buildings must pay CGT within 30 days of completion, except in 2019/20 when already filing a self assessment tax return.
| Other payment dates | |||
|---|---|---|---|
| Class 1A NIC | 19 July | 2021 | 2020 |
| Class 1B NIC | 19 October | 2021 | 2020 |
Corporation tax is due 9 months and 1 day from the end of the accounting period, unless a ‘large’ company paying by quarterly instalments.
| 2019/20 Filing deadlines | |
|---|---|
| Issue P60s to employees | 31 May 2020 |
| P11D, P11D(b) | 6 July 2020 |
| Self Assessment Tax Return (SATR) paper version | 31 October 2020 |
| Online SATR if outstanding tax to be included in 2021/22 PAYE code |
30 December 2020 |
| Online SATR | 31 January 2021 |
Non-resident CGT return is due within 30 days of completion of sale of UK L&B by a non-resident.
Useful rates
| National Minimum Wage Rates per hour |
From 1.04.20 |
From 1.04.19 |
|---|---|---|
| Aged 25 and over (National Living Wage) | £8.72 | £8.21 |
| Aged 21 - 24 | £8.20 | £7.70 |
| Aged 18 - 20 | £6.45 | £6.15 |
| Aged 16 - 17 | £4.55 | £4.35 |
| Apprentices | £4.15 | £3.90 |
You are advised to consult us before acting on any information contained herein.
Also See: Tax advantaged employee share schemes
Also See: Capital gains tax advice
Any questions? Schedule a call with one of our experts.
Gourav Sachdeva
I have more than 7 years of experience in tax and accounting. I have expertise in corporate tax and VAT division which consists of both advisory work and compliance.
Gourav Sachdeva
I have more than 7 years of experience in tax and accounting. I have expertise in corporate tax and VAT division which consists of both advisory work and compliance.
