Income Tax Rates and Allowances

Income Tax Rates and Allowances

 

Income Tax Rates and Allowances (Table A)

Main allowances 2020/21 2019/20
Personal Allowance (PA)*† £12,500 £12,500
Blind Person’s 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*PA will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £125,000 or more.

†£1,250 of the PA can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.

§ 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 and Dividend income within each band:
G S D
Basic 20% 20% 7.5%
Higher 40% 40% 32.5%
Additional 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). 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 will tax 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.

High Income Child Benefit Charge (HICBC)

1% of child benefit for each £100 of adjusted net income between £50,000 and £60,000.

Income Tax – Scotland 2019/20 Rate 2020/21 2019/20
Starter Rate 19% £1 – £2,085 £1 – £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 over 150,000

The Scottish rates and bands do not apply for savings and dividend income, which are taxed at normal UK rates.

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 for tax purposes

 

Registered Pensions (Table B)

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.

The AA is usually reduced by £1 for every £2 by which relevant income exceeds £240,000 (2019/20: £150,000), down to a minimum AA of £4,000 (2019/20: £10,000)

The AA can also be reduced to £4,000, where certain pension drawings have been made.

Car and Fuel Benefits (Table C)

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%.

Car Fuel

Where employer provides fuel for private motoring in an employer-owned car, CO2-based percentage from above table multiplied by £24,500 (2019/20 £24,100).