Budget 2020: tax rates and allowances

Budget 2020: tax rates and allowances

Tax Rates 2020
2019/202020/21
££
Income tax rates: England and Wales only
(non-dividend income)
  
0% starting rate for savings only (note 1)Up to 5,000Up to 5,000
20% basic rate tax12,501-50,00012,501-50,000
40% higher rate tax50,001-150,00050,001-150,000
45% additional rate taxAbove 150,000Above 150,000
Scottish rates of income tax (non-dividend income)                                                   
19% starting rate12,501-14,54912,501-14,585
20% basic rate tax14,550-24,94414,586-25,158
21% intermediate rate tax24,945-43,43025,159-43,430
41% higher rate tax43,431-150,00043,431-150,000
46% top rateAbove 150,000Above 150,000
Note 1: Scottish taxpayers pay the same tax as the rest of the UK on dividends and savings interest.

 

 

2019/202020/21
Income tax rates (dividend income) 
Dividend allowance£2,000£2,000
Dividend ordinary rate (for dividends within basic rate band)7.50%7.50%
Dividend upper rate (for dividends within higher rate band)32.50%32.50%
Dividend additional rate (for dividends above higher rate band)38.10%38.10%
Child benefit/guardian’s allowance rates  
Higher rate (eldest or only child) (per week)£20.70 £21.05
Other children£13.70 £13.95
Guardian’s allowance per week£17.60 £17.90
1      An income tax charge will apply to taxpayers with ‘adjusted net income’ exceeding £50,000 in a tax year, when child benefit is also received by them or their partner. The charge will reduce the financial benefit of receiving child benefit for those with income between £50,000 and £60,000 and remove it completely for taxpayers with income above £60,000.

2      From January 2021, no child benefit payments are made in respect of children living overseas. This will apply to EEA migrants arriving in the UK under the new immigration system.

Personal allowances ££ 
Personal allowance (note 1)12,50012,500
Dividend allowance2,0002,000
Maximum married couple’s allowance for those born before 6 April 1935 (note 2)8,9158,915
Married couple’s allowance – minimum amount3,4503,450
Micro entrepreneur’s allowance: individuals making property or trading incomes below the level of the allowance will no longer need to declare or pay tax, while those whose income exceeds the allowance have the choice of simply deducting the allowance instead of calculating their exact expenses or calculating their profits in the normal mannerAllowance:
1,000
each
 Allowance: 1,000
each
Income limit (note 3)100,000 100,000
Income limit for married couple’s allowance: born before 6 April 193529,600 29,600
Blind person’s allowance2,450 2,450
Rent-a-room relief7,500 7,500
Transferable/shareable tax allowance for married couples and civil partners (note 4)1,2501,250
2019/202020/21
££
Personal savings allowance for basic rate taxpayers (note 5)1,000 1,000
Personal savings allowance for higher rate taxpayers500 500
Personal savings allowance for additional rate taxpayers00
Note 1: From 2016/17 onwards, all individuals are entitled to the same personal allowance, regardless of the individual’s date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth.
Note 2: This allowance is reduced by £1 for every £2 of income in excess of the income limit, but married couple’s allowance will not reduce below £3,450.
Note 3: Personal allowances are subject to the £100,000 income limit, which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit, down to zero.
Note 4: This allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax, or not liable at the higher or additional rates, can transfer this amount of their unused personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rates.

If the couple marry or register a civil partnership, they will get the allowance on a pro-rata basis for the rest of that tax year. If one of them dies or there is a divorce or separation, the allowance continues until the end of the tax year.

National insurance 
Lower earnings limit, primary class 1 (per week)£118 £120
Upper earnings limit, primary class 1 (per week)£962 £962
Apprentice upper secondary threshold (AUST) for under 21s/25s£962 £962
Primary threshold (per week)£166£183
Secondary threshold (per week)£166 £169
Employment allowance (per year/employer) (note 1)£3,000£4,000
Employee’s primary class 1 rate between primary threshold and upper earnings limit12% 12%
Employee’s primary class 1 rate above upper earnings limit2% 2%
Married woman’s reduced rate between primary threshold and upper earnings limit5.85% 5.85%
Married woman’s rate above upper earnings limit2.00% 2.00%
Employer’s secondary class 1 rate above secondary threshold13.80% 13.80%
2019/202020/21
Class 2 rate (per week where profits are above small profits threshold) 

£3.00

£3.05
Class 2 small profits threshold (per year)£6,365£6,475
Special class 2 rate for share fishermen (per week)£3.65 £3.70
Special class 2 rate for volunteer development workers£5.90 £6.00
Class 3 voluntary rate (per week)£15.00 £15.30
Class 4 lower profits limit£8,632 £9,500
Class 4 upper profits limit£50,000 £50,000
Class 4 rate between lower profits limit and upper profits limit9.00% 9.00%
Class 4 rate above upper profits limit2.00% 2.00%
Note 1:

a)   From April 2020, this will be limited to employers with an employer NIC bill below £100,000 in the previous tax year.

b)   Any deemed payments made to off-payroll workers do not count towards the £100,000 employers (secondary) class 1 NICs total. You cannot claim employment allowance for these workers.

c)   Employment allowance cannot be claimed for off-payroll workers.

Pensions £ £
Annual allowance (note 1)40,00040,000
Lifetime allowance1,055,000 1,073,100
Money purchase annual allowance (note 2)4,000 4,000
Note 1:

a)   The annual allowance is a limit to the total amount of contributions that can be paid to defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes.

b)   From 2016/17 the annual allowance for those earning above the threshold income of £110,000 and £150,000 adjusted income is to be reduced on a tapering basis by £1 for every £2 of income, subject to a minimum allowance of £10,000. From 2020/21 the threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an adjusted income above £240,000.

c)   From April 2020, the annual allowance for individuals with total income (including pension accrual) of over £300,000 will reduce from £10,000 to £4,000.

Note 2: The annual allowance is currently capped at £40,000, although a lower limit of £4,000 may apply if you have already started drawing a pension.

2019/202020/21
Reliefs and incentives  
Enterprise Investment Scheme (EIS) – maximum (note 1)£1,000,000£1,000,000
Venture Capital Trust (VCT) – maximum£200,000£200,000
Enterprise Management Incentive Scheme (EMI) – employee limit up to the value of £250,000 in a three-year period£250,000£250,000
Seed Enterprise Investment Scheme (SEIS) – maximum (note 2)£100,000£100,000
Social Investment Tax Relief (SITR) – maximum£1,000,000£1,000,000
Income tax relief on EIS schemes30%30%
Income tax relief on VCT schemes30%30%
Income tax relief on SEIS schemes50%50%
Income tax relief on SITR schemes30%30%
Note 1: From 6 April 2018, the annual limit is doubled to £2m, provided that any amount over £1m is invested in one or more knowledge-intensive companies.

Note 2: Capital gains tax reinvestment relief may also be available for investments made in 2018/19 on 50% of the amount invested.

Individual Savings Account (ISA): £ £
ISA (NISA) annual limit20,00020,000
Junior ISA investment annual limit – under 18, living in the UK4,3689,000
Child Trust Fund annual limit4,3689,000
Lifetime ISA annual limit (note 1)4,0004,000
Note 1: To open a Lifetime ISA you must be 18 or over but under 40. Contributions can be made until age 50. The government will add a 25% bonus to the savings, up to a maximum of £1,000 per year. The lifetime ISA limit of £4,000 counts towards the annual ISA limit.
Capital gains tax  
Rate
– basic rate tax payer 10% 10%
– higher rate tax payer 20% 20%
Gain on sale of residential property
– basic rate tax payer18%18%
– higher rate tax payer28%28%
2019/202020/21
Annual exemptions – individuals (per year)£12,000£12,300
Certain trusts for disabled persons (per year)£12,000£12,300
Other trusts (per year)£6,000£6,150
Entrepreneurs’ Relief lifetime limit (note 1)£10,000,000£1,000,000
Investors’ Relief lifetime limit£10,000,000£10,000,000
Entrepreneurs’/Investors’ rate10%10%
Chattels exemption£6,000£6,000
Note 1: Entrepreneurs’ Relief lifetime limit is reduced from £10m to £1m for disposals made on or after 11 March 2020.
Inheritance tax  
Single person’s nil-rate band£1-£325,000£1-£325,000
Single person’s 40% bandover £325,000over £325,000
Residence nil-rate band (RNRB) – maximum (note 1)£150,000£175,000
Reduced rate (note 2)36%36%
IHT rate (for chargeable lifetime transfers)20%20%
Married couples or civil partnerships allowance nil-rate band£650,000£650,000
Gifts to charitiesExemptExempt
Small gifts to same person£250£250
General gifts – annual exemption£3,000£3,000
Wedding gifts from parent£5,000£5,000
Wedding gifts from grandparent/party£2,500£2,500
Wedding gifts from other person£1,000£1,000
Note 1: The RNRB is available in respect of a main residence given away to children (including adopted, foster or stepchildren). Any unused nil-rate band transfers to the deceased’s spouse or civil partner, even where death predates the availability of the additional threshold. It applies in addition to the existing nil-rate band (NRB) or threshold (currently £325,000) if the individual and estate meet the qualifying conditions.

Note 2: The estate can pay inheritance tax at a reduced rate of 36% on some assets if you leave 10% or more of the net value to charity in your will.

Business Property Relief
Business or interest in a business and transfer if unquoted shareholdings 100% 100%
2019/202020/21
Taxation of trusts  
Accumulation or discretionary trusts:
Trust income up to £1,000 – dividend type income (note 1)7.50%7.50%
Trust income up to £1,000 – all other income20%20%
Trust income over £1,000 – dividend type income (note 1)38.10%38.10%
Trust income over £1,000 – all other income45%45%
Interest in possession trusts:
Dividend type income7.50%7.50%
All other income20%20%
Note 1: Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.
Corporation tax  
All profits and gains (excluding determination agreements and diverted profits (note 1)19%19%
S455 tax on all loans made by close companies to participator32.50%32.50%
Capital allowances  
Main writing-down allowance (reducing balance)18%18%
Special rate writing-down allowance (reducing balance)6%6%
Structures and buildings allowance (SBA)2%3%
Motor cars if CO2 > 50g/km but does not exceed 110g/km (note 1)18%18%
Motor cars if CO2 > 110g/km (note 1)6%6%
FYA – New and unused motor cars if CO2 emissions are 50 g/km or less (or car is electric) (note 1)100%100%
Small pool write-off where WDV is £1,000 or less100%100%
First-year allowances for certain energy-saving/water-efficient products (note 2)100%NA
Annual investment allowance (AIA) (note 3)£1,000,000£1,000,000
Annual investment allowance100%100%
Note 1: From April 2021, the thresholds for FYA will be reduced from 50g/km to 0g/km. Main rate of 18% capital allowance will be applicable for business cars with CO2 emissions not exceeding 50g/k. Business cars’ CO2 emission exceeding 50g/km will be eligible for writing-down allowance at the special rate of 6%.

Note 2: From 1 April 2020 for incorporated businesses and from 6 April 2020 for unincorporated businesses, environmental enhanced capital allowances will be abolished.

Note 3: From 1 January 2019 the annual investment allowance is increased from £200,000 to £1m for investment made from 1 January 2019. This is temporarily increased for two years until 31 December 2020. The threshold will revert back to £200,000 from 1 January 2021.

2019/202020/21
Research and development tax credit rates  
SME rate230% 230%
Research and development SME payable credit14.5%14.5%
Research and development expenditure credit (RDEC) scheme12% 13%
Film/High-end TV/videogames tax credit25%25%
Open-ended investment companies and authorised unit trusts20%20%
Patent box  
Patent box10%10%
VAT  
Standard rate20%20%
Reduced rate5%5%
Zero rate0%0%
Flat rate of VAT on gross turnover (for limited cost trader)16.5%16.5%
Normal scheme registration threshold£85,000£85,000
Deregistration threshold£83,000£83,000
Cash accounting scheme – maximum to join£1,350,000£1,350,000
Cash accounting scheme – exit threshold£1,600,000£1,600,000
Annual accounting scheme – maximum to join£1,350,000£1,350,000
Annual accounting scheme – exit threshold£1,600,000£1,600,000
Flat-rate scheme – maximum allowed to join£150,000£150,000
Flat-rate scheme exit threshold£230,000£230,000

 

 

2019/202020/21
Annual tax on enveloped dwellings (ATED)£ £ 
More than £0.5m but not more than £1m3,6503,700
More than £1m but not more than £2m7,4007,500
More than £2m but not more than £5m24,80025,200
More than £5m but not more than £10m57,90058,850
More than £10m but not more than £20m116,100118,050
More than £20m232,350236,250
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