TAX RATES AND ALLOWANCES 2020/21

Lambert Chapman publications

Tax Rates and Allowances shown for England.

Income Tax Bands and Rates

2019/20 2020/21
Starting rate* of 0% on savings up to£5,000£5,000
Basic-rate band£37,500£34,500
Higher-rate band£37,501 to £150,000£34,501 to £150,000
Additional-rate bandabove £150,000above £150,000
Basic rate20%20%
Higher rate40%40%
Additional rate45%45%
Dividend ordinary rate7.50%7.50%
Dividend higher-rate32.50%32.50%
Dividend additional rate38.10%38.10%

* The starting rate does not apply if taxable income exceeds the starting rate limit.

Income Tax Allowances

2019/20 2020/21
Personal allowance*£12,500£12,500
Personal Savings AllowanceBasic-rate taxpayer£1,000£1,000
Personal Savings AllowanceHigher-rate taxpayer£500£500
Personal Savings AllowanceAdditional-rate taxpayer£0£0
Dividend allowance at 0%£2,000£2,000
Marriage/civil partner transferable allowance**£1,250£1,250
Trading allowance and property allowance each***£1,000£1,000
Rent-a-room allowance£7,500£7,500
Blind person’s allowance£2,450£2,500

* The personal allowance is reduced by £1 for each £2 of income from £100,000 to £125,000 (2019/20, £125,000).
** Any unused personal allowance may be transferred to a spouse or civil partner, where the recipient is not liable to higher or additional-rate tax.
*** Note that landlords and traders with gross income from each of these sources in excess of £1,000 can deduct the allowance from their gross income as an alternative to claiming expenses.

 

Vehicle and Fuel Benefits in Kind

The taxable benefit in kind is calculated as a percentage of the car’s UK list price. The percentage depends on the car’s CO2 emissions in grams per kilometre (g/km).

 CO2 Emissions (g/km)  Electric Range (miles) Cars registered before 6 April* Cars registered on/after 6 April*
 0 n/a 0% 0%
1-50130 and over 2%0%
 1-5070-129 5%3%
 1-5040-69 8%6%
 1-5030-39 12%10%
 1-50Under 30 14%12%
 51-54n/a 15%13%
 Over 54n/a + 1% every 5g/km up to 37%  + 1% every 5g/km up to 37%

* Diesel vehicles not meeting the RDE2 standard will be liable to a 4% surcharge.

The list price is on the day before first registration, including most accessories, and is reduced by any employee’s capital contribution (max £5,000) when the car is first made available.

Where the cost of all fuel for private use is borne by the employee, the fuel benefit is nil. Otherwise, the fuel benefit is calculated by applying the car benefit percentage to the car fuel benefit multiplier (below).

Company Car Fuel2019/202020/21
Car fuel benefit multiplier£24,100£24,500
Company vans*
Van benefit charge£3,430£3,490
Van fuel benefit multiplier£655£666

* Applies where private use is more than home-to-work travel. Payments by employees for private use may reduce these benefits-in-kind. Zero-emmision vans have a benefit value of £2,792 (2019/20 £2,058).

Tax-Free Mileage Allowances

Cars and vans (inc. electric vehicles)First 10,000 business miles 45p
Thereafter25p
Motorcycles24p
Bicycles20p
Business passenger5p

The tax-free business mileage allowance rates apply for qualifying business journeys incurred by employees using their own vehicles over the course of the tax year.
For national insurance purposes, a rate of 45p may apply for all business miles incurred for cars and vans.

 

Capital Gains Tax

2019/202020/21
Main ratesIndividual basic rate10%10%
Individual above basic rate20%20%
Trusts and estates20%20%
Surcharge – for gains on residential property not eligible for private residence relief and carried interest8%8%
Annual ExemptionIndividuals£12,000£12,300
Trusts£6,000£6,150
Entrepreneurs’ ReliefApplicable rate10%10%
Lifetime limit (from 11.3.20)£10m£1m
Investors’ reliefApplicable rate10%10%
Lifetime limit£10m£10m

 

Inheritance Tax

2019/202020/21
Nil-rate band threshold*£325,000£325,000
Main residence nil-rate band**£150,000£175,000
Combined threshold limit for married couples and civil partners, including main residence nil-rate band£950,000£1m
Relief for businesses, unlisted/AIM companies, certain farmland/farm buildings50% or 100%50% or 100%

* Up to 100% of any unused part of a deceased person’s nil-rate band can be claimed by the surviving spouse/civil partner on their death. This also applies to the main residence nil-rate band, albeit the main residence nil-rate is subject to the taper withdrawal below.
** For estates in excess of £2m, a 50% taper withdrawal applies to the excess.

Tax Rates

2019/202020/21
Main rate40%40%
Chargeable on lifetime transfers20%20%
Transfers on or within seven years of death*40%40%
Reduced rate**36%36%

* All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purposes of calculating the tax payable. This may then be reduced as shown in the table below.
** Applies if 10% or more of net chargeable estate is left to a UK-registered charity.

Years before death 0 – 3 3 – 4 4 – 5 5 – 6 6 – 7
Tax reduced by0%20%40%60%80%

 

UK Company Taxation

Financial year from 1 April  20192020
Corporation tax main rate19%19%
Loans to participators32.5%32.5%
Diverted profits tax25%25%

 

Main Capital Allowances

Initial Allowances

Annual investment allowance: on first £1m (excludes cars)*100%
First-year allowance: including new and unused low CO2 emission cars (up to 50g/km) and zero-emission vehicles100%

* Applies from 1 January 2019 to 31 December 2020, reverting to £200,000 from 1 January 2021. Transitional rules may apply for chargable periods spanning these dates.

Writing-down Allowances

Plant and machinery main-rate expenditure18%
Plant and machinery special-rate expenditure6%
Cars51g/km – 110g/km18%
Over 110g/km6%
Structures and buildings allowance – straight-line relief3%

 

VAT

From 1 April  20192020
Standard rate20%20%
VAT fraction1/61/6
Reduced rate, eg on domestic fuel5%5%
VAT fraction1/211/21
Zero rate0%0%
ExemptN/AN/A

 

Taxable Turnover Limits

From 1 April  20192020
Registration (last 12 months or next 30 days) over£85,000£85,000
Deregistration (next year) under£83,000£83,000
Annual and cash accounting schemes turnover limit £1.35m£1.35m
Flat-rate scheme turnover limit£150,000£150,000

 

Research & Development (R&D)

Revenue expenditure – SMEs230%
Capital expenditure – all companies100%
SME company R&D payable tax credit14.50%
Large company R&D taxable expenditure credit13%

 

Tax Efficient Investments

Annual investment limit  2019/202020/21
ISA£20,000£20,000
Lifetime ISA*£4,000£4,000
Help-to-buy ISA (existing savers only)up to £200/month
Junior ISA and Child Trust Fund£4,368£9,000
Venture Capital Trust at 30%£200,000£200,000
Enterprise Investment Scheme at 30%**£1m£1m
Seed EIS (SEIS) at 50%£100,000£100,000
SEIS capital gains tax reinvestment relief50%50%
Social investment tax relief at 30%£1m£1m

* Reduces ISA limit by amount invested in Lifetime ISA.
** Up to £2m in a knowledge-intensive company.

 

Registered Pensions

2019/202020/21
Lifetime allowance limit£1.055m£1.073m
Money purchase annual allowance£4,000£4,000
Annual allowance limit *£40,000£40,000
Minimum age for accessing benefits5555
On cumulative benefits exceeding£1.055m£1.03m
 lump sumMaximum pension commencement 25% of pension fund value

* Tapered at a rate of 50% of income down to £4,000 (£10,000 2019/20) if threshold income over £200,000 (£110,000 2019/20) and adjusted income over £240,000 (£150,000 2019/20). Restrictions may also apply based on net relevant earnings.

Subject to certain conditions, the unused amount of the annual allowance can be carried forward up to three years and used once the current year annual allowance has been fully utilised.

 

Stamp Duty

Consideration on shares over £1,0000.50%

Property Taxes

The incremental rate of tax is only payable on the part of the property price within each band. An additional 3% rate (4% in Scotland) applies to the purchase of an additional residential property above £40,000 and all corporate residential properties.

England and Northern Ireland: Stamp duty land tax

On the transfer of residential property*On the transfer of non-residential property
£0 – £125,0000%Less than £150,0000%
£125,000 – £250,0002%£150,000 – £250,0002%
£250,000 – £925,0005%Over £250,0005%
£925,000 – £1.5m10%
Over £1.5m12%

* First-time buyers pay nothing on the first £300,000 for properties up to £500,000. A rate of 5% applies between £300,000 and £500,000.

For residential purchases by ‘non-natural persons’ over £500,000 a rate of 15% applies, subject to certain exclusions.

National Insurance

Class 1
Weekly earningsEmployee rateWeekly earningsEmployer rate
Up to £183Nil*Up to £169Nil
Over £183-£96212%Over £169 – £96213.8%**
Over £9622%Over £96213.8%
Over state pension age0%Over state pension age13.8%

* Entitlement to contribution-based benefits are retained for earnings between £120 and £183 per week.
** 0% for staff under 21 and apprentices under 25 on earnings up to £962 per week.

Class 1A
On relevant benefits, including car and fuel benefits13.80%
Class 2
Self-employed above small profits threshold£3.05 per week
Small profits threshold£6,475 per year
Class 3
Voluntary£15.30 per week
Class 4*
Self-employed on profits above £9,500 – £50,0009%
Over £50,0002%

* Exemption applies if the state retirement age is reached by 6 April 2020.

Employment Allowance

Per employer, per year (excludes one-person companies)*£4,000

* One claim only for companies in a group or under common control. Not available where the director is the only employee paid earnings above the secondary threshold for class 1 NICs. From April 2020, this will be limited to employers with an employer NICs bill below £100,000 in the previous tax year.

Apprenticeship Levy
A levy of 0.5% applies where the pay bill exceeds £3m. There is an allowance of £15,000. Further conditions apply, so please consult with us.

IMPORTANT NOTICE
These rates and allowances are based on Budget 2020 announcements made by the UK and Northern Ireland, Scottish and Welsh Governments and are for information only.

All information is subject to change before 6 April 2020 and confirmation by the respective governments. The above must not be considered advice and no warranty is given for the accuracy or completeness of the details. Professional advice should be sought before making any decisions.

Rates apply to the UK and Northern Ireland unless otherwise stated.

 

> Download Lambert Chapman Tax Rates and Allowances 2020/21

 

Disclaimer: The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.