The start of a new tax year

Date Published: April 6, 2020

Category: Uncategorized

Today brings the start of the 2020/21 tax year. We take a look at what’s staying the same and the changes coming into play.

New Tax Year

National Insurance payments

The Chancellor used Budget 2020 to bring in a rise in the National Insurance Contribution thresholds. For both employed and self-employed workers, the threshold is now £9,500, up from £8,632. Any earnings above this will incur 12% NIC. That means that half of UK households will be £120 better off on average, according to the Institute for Fiscal Studies.

The state pension

There is a 3.9% increase in the flat-rate state pension, bringing the yearly total to £9,110.40. For those on the old state pension, the increase brings payments up to £6,981 a year, not including top-ups.

Pensions annual allowance

This tax year sees an increase in the annual allowance. The threshold from which the annual allowance starts tapering off is now £240,000, a change that has been made in part to avoid penalising doctors for taking extra shifts.

The lifetime pension allowance rises with inflation to £1,073,100.

Capital gains tax

The yearly capital gains tax allowance rises to £12,300 – a £300 increase.

Personal allowance

The personal allowance isn’t changing for this tax year. It remains at £12,500 for England, Scotland, and Northern Ireland.

The income tax bands

England and Northern Ireland:

  • Basic rate: 20% on annual earnings above the Pay As You Earn threshold up to £37,500
  • Higher rate: 40% on annual earnings from £37,501 to £150,000
  • Additional rate: 45% on annual earnings above £150,000

Scotland:

  • Starter rate: 19% on annual earnings above the PAYE threshold up to £2,085
  • Basic rate: 20% on annual earnings from £2,086 to £12,658
  • Intermediate rate: 21% on annual earnings from £12,659 to £30,930
  • Higher rate: 41% on annual earnings from £30,931 to £150,000
  • Additional rate: 45% on annual earnings above £150,000
  • Top rate: 46% on annual earnings above £150,000

Recent Scottish Parliamentary approval means that the above rates will not take effect until 10th May 2020.

Wales:

  • Basic rate: 20% on annual earnings above the PAYE threshold up to £37,500
  • Higher rate: 40% on annual earnings from £37,501 up to £150,000
  • Additional rate: 45% on annual earnings above £150,000

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