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Spring Budget 2020: Tax rates and allowances update for 2020/21

The Chancellor announced small increases to personal tax allowances effective from 6 April 2020.

There were no radical changes made to personal tax rates and allowances announced in the 2020 Budget.

The capital gains annual exemption is currently set at £12,000, but will increase to £12,300 from 6 April 2020. While this represents a modest year-on-year saving of up to £84 (£300 x 28%) for each taxpayer, the government’s objective is to ensure that the annual exemption is increased annually to keep pace with inflation, in line with the Consumer Prices Index (CPI). 

As always, trustees continue to be entitled to an annual exemption equal to 50% of the amount given to individuals (i.e. £6,150).

As previously announced, the personal allowance – the threshold where most taxpayers with an annual income of £100,000 or less start paying tax - will remain at £12,500 for another year. The basic rate and higher rate limits will stay at £37,500 and £50,000 respectively. 

From 2021/22 onwards, the personal allowance and basic rate limit will increase in line with CPI, as is the case for the CGT annual exemption.

Finally, there is good news for employees and the self-employed! The Chancellor announced that the National Insurance (NI) Primary Threshold and Lower Profits limit, for employees and the self-employed respectively, will increase to £9,500 from 6 April 2020. This is up from £8,632 in 2019/20 and is estimated to save a typical employee £104 and a typical self-employed person £78 in 2020/21. 

As a result of these changes, a typical UK taxpayer will pay less tax and therefore keep more of the income that they earn. However, in the first Budget of the decade, the government have been quite conservative in increasing personal tax allowances, so the savings for the average taxpayer in 2020/21 will not be substantial. 

Read more on the Budget here.

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Akin Coker

+44 (0)20 7556 1332
cokera@buzzacott.co.uk

There were no radical changes made to personal tax rates and allowances announced in the 2020 Budget.

The capital gains annual exemption is currently set at £12,000, but will increase to £12,300 from 6 April 2020. While this represents a modest year-on-year saving of up to £84 (£300 x 28%) for each taxpayer, the government’s objective is to ensure that the annual exemption is increased annually to keep pace with inflation, in line with the Consumer Prices Index (CPI). 

As always, trustees continue to be entitled to an annual exemption equal to 50% of the amount given to individuals (i.e. £6,150).

As previously announced, the personal allowance – the threshold where most taxpayers with an annual income of £100,000 or less start paying tax - will remain at £12,500 for another year. The basic rate and higher rate limits will stay at £37,500 and £50,000 respectively. 

From 2021/22 onwards, the personal allowance and basic rate limit will increase in line with CPI, as is the case for the CGT annual exemption.

Finally, there is good news for employees and the self-employed! The Chancellor announced that the National Insurance (NI) Primary Threshold and Lower Profits limit, for employees and the self-employed respectively, will increase to £9,500 from 6 April 2020. This is up from £8,632 in 2019/20 and is estimated to save a typical employee £104 and a typical self-employed person £78 in 2020/21. 

As a result of these changes, a typical UK taxpayer will pay less tax and therefore keep more of the income that they earn. However, in the first Budget of the decade, the government have been quite conservative in increasing personal tax allowances, so the savings for the average taxpayer in 2020/21 will not be substantial. 

Read more on the Budget here.

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