2020/21 Tax Rates and Allowances
This page contains all of the personal income tax changes which were published on the gov.uk site on Fri 28 Feb 2020. These rates come into effect at the start of the new tax year, on April 6th 2020.
Gone, it would seem, are the days of the defensive Chancellor, protecting their red box of tricks for the big reveal in front of Parliament. Instead a social media drip feed of announcements by brand Sunak, left today's speech feeling a little hollow, like a bit of an afterthought. Most of what featured today had already been announced.
The big question left to be answered in parliament today was which taxes would go up? Restrained by the Conservative party manifesto pledge not to raise income tax, national insurance or VAT, where would the axe fall? Sandwiched between positives in his "3 Point Plan Speech" was the news that, for today at least, only two bitter pills would have to be swallowed:
- Freezes! The personal allowance and higher rate threshold freeze, until 2026. This means the Personal Allowance of £12,570, basic rate limit at £37,700 and higher rate threshold of £50,270, introduced for the 2021/22 tax year, will all remain unchanged until the 2025/26 tax year.
- The long awaited Corporation Tax hike arrived. It's jump to 25% probably caught many off guard, but the delay of introduction until 2023 and the specifics on its application for smaller companys, the tax treatment of losses and changes to capital allowances, went some way to soften the blow.
Overall, Sunak left us with no doubt that looming in the budgets to come must lie more pinching of purses and increased taxation to pay for supports and recovery programs, post COVID.
Below are the main points of today's budget news:
COVID Supports – New and continued
- An extension to the furlough scheme until the end of September. Government to continue paying 80% of employees' wages for hours they cannot work until July. At this point employers will be asked to contribute 10% in July and 20% in August and September, towards the cost of covering employee's wages.
- SEISS for self-employed extended until September. Those who's turnover dropped by less than 30% will receive reduced support.
- Access for the self-employed to grants has been widened. Those who completed and submitted their 2019/20 tax return by 28th Feb 2021 will now qualify for SEISS scheme.
- £20 weekly uplift in Universal Credit worth £1,000 a year to be extended for another six months
- Working Tax Credit claimants will get a £500 one-off payment
- Minimum wage to increase to £8.91 an hour from April
- Reliefs for home office expenses, COVID tests and cycle exemptions have been extended.
Personal
- No changes to income tax rates, thresholds, National Insurance, VAT.
- Personal allowances such as pension, savings, inheritance and CGT are all unchanged.
- Pension lifetime allowance has been frozen for 5 years. It will remain at its current level of £1,073,100 (2020/21) until 2026, rather than increasing in line with inflation.
- Tax-free personal allowance to be frozen at £12,570 until 2026
- Higher rate income tax threshold to be frozen at £50,270 until 2026
- Stamp duty holiday on house purchases in England and Northern Ireland extended until the 30th June
- A new mortgage guarantee scheme to help first-time buyers access 95% mortgages, on property with a value up to £600,00
Fuel and Alcohol Duty
- No increases on fuel duty.
- No increases to duty on beer, wine and spirits.
Business Taxation
- Corporation tax on company profits to rise from 19% to 25% in April 2023. The rate will be kept at 19% for smaller companies with profits less than £50,000.
- Tax treatment of losses has become more generous- Losses of up to £2m can now be carried back for 3 years.
- Capital Allowance changes- a new Super Deduction means that from April 2021 companies can now reduce their tax bill by 130% of the cost of new plant and machinery and 50% of the cost of special rate assets.
- The reduced VAT rate of 5% for businesses such as restaurants, hotels and other leisure attractions, has been extended until the end of September, then an interim rate of 12.5% will apply from 1st of October to March 2022.
- The 100% Business rates holiday will be extended through to the end of June. After that there will be a 2/3rd reduction for the following 9 months.
- Incentive payments for hiring new apprentices are being doubled to £3,000 while £126m will be invested to triple the number of new traineeships.
- £5bn in Restart Grants made available for shops and other businesses forced to close. £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses
- A new Government loan scheme for businesses to run until the end of the year. Loans can be between £25,000 and £10m
- Help To Grow Scheme announced to help small businesses increase productivity. It will provide free access to training courses on management and going digital. There are also 50% discounts on software packages to help increase productivity. Businesses need to register to access the help. More information here.
Sports, Arts and Culture
- £400m to help arts venues and museums in England re-open
- £300m recovery package for professional sport and £25m for grassroots football
- £2.8m pledged to help in the joint UK and Ireland bid to stage the 2030 World Cup
- £1.2m to stage the delayed Women's Euros football tournament in England in 2022
Environment, Nations, Regions and Other Announcements
- £1.65 billion boost to aid the vaccine roll out
- New Visas for highly skilled migrants to be made available
- £10m pledged for mental health support for Veterans
- An extra £19m in funding support for domestic violence programs
- New UK Infrastructure Bank to be set up in Leeds
- Funding for the devolved Governments: £1.2bn in funding for the Scottish government, £740m for the Welsh government and £410m for the Northern Ireland executive
- Development of Freeports across the UK- Special Economic Zones- which allow companies importing and exporting from the UK to operate under simplified customs, tax, and planning rules. The first 8 in England listed: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
- £150m for community groups to take over pubs at risk of closure
- £1bn fund to promote regeneration in a further 45 English towns, including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich
- Green Savings Bonds - Savers will be able to buy into bonds offered through National Savings and Investments. These Government bonds will include investment in expanding offshore wind power plants, planting 30,000 trees and revamping UK homes and public transport.
- Increase in contactless payment limit to £100
Annnnd phew! That's the main points...I think. Feel free to contact us with points I may have missed- support@listentotaxman.com. We will get a more detailed budget review together as soon as possible.
Personal Tax
2019/2020 Tax Rates and Allowances
This page contains all of the personal income tax changes which were announced at the October 29th, 2018 Budget. These rates come into effect at the start of the new tax year, on April 6th 2019.
2018/2019 Tax Rates and Allowances
We have published a quick reference to the significant changes to the tax rates and bands, personal tax allowances and national insurance figures which come into effect from April 6th 2018.