Tax Rates 2020/21

Income Tax

*PA is withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There is no allowance given above £125,000.

† The part of the PA that is transferable to a spouse or civil partner who is not a higher or top rate taxpayer.

** If gross income exceeds it, the limit may be deducted instead of actual expenses.

BRB and additional rate threshold are increased by personal pension contributions (up to permitted limit) and Gift Aid donations.

General income (salary, pensions, business profits, rent) usually uses personal allowance, basic rate and higher rate bands before savings income (interest). Scottish taxpayers are taxed at different rates on general income (see below).

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 taxes 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.

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

High Income Child Benefit Charge (HICBC)

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

Pensions

Annual relievable pension inputs are the higher of earnings (capped at AA) or £3,600.

*Usually tapered down, to a minimum of £4,000 (2019/20: £10,000), when adjusted income exceeds £240,000 (2019/20 £150,000).

†Applies to those reaching state retirement age after 5 April 2016.

Annual Investment Limits

National Insurance Contributions

Class 1 (Employees)

*Nil rate of employer NIC for employees under the age of 21 and apprentices under 25, up to £962pw.

**Some businesses do not qualify, including certain sole director companies and employers who have an employer’s NIC liability of £100,000 or more for 2019/20.

Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self employed)

Class 3 (Voluntary)

Class 4 (Self employed)

Vehicle Benefits

Cars

Taxable benefit: List price multiplied by chargeable percentage.

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%.

Vans

Chargeable value of £3,490 (2019/20: £3,430) if private use is more than home-to-work. Electric vans £2,792 (2019/20: £2,058).

Fuel

Car: CO2-based percentage from above table multiplied by £24,500 (2019/20: £24,100).

Van: £666 (2019/20: £655).

Employee contributions do not reduce taxable figure unless all private fuel is paid for by the employee (in which case there is no benefit charge).

Tax-Free Mileage Allowances

Capital Gains Tax

*Individuals are taxed at 18%/28% on gains on residential property and receipts of carried interest. Trusts and estates are taxed at 28% in these circumstances.

**ER is available for lifetime gains of up to £1m (£10m for disposals pre 11.3.20). Qualifying disposals include a trading business and shares in a trading company (from a minimum 5% holding) by an officer/employee. Various conditions apply.

***Shares in an unquoted trading company may qualify for IR on lifetime gains up to £10m, if acquired by someone who is not a paid officer or employee of the company and disposed of after 5.4.19. Various conditions apply.

Corporation Tax

*Additional deduction for qualifying R&D

**Taxable expenditure credit for qualifying R&D

SMEs that make losses can surrender the deduction to HMRC in exchange for a payment of 14.5% of the loss.

Main Capital Allowances

Property Taxes

Annual Tax on Enveloped Dwellings (ATED)

ATED applies to ‘high value’ residential properties owned via a corporate structure, unless the property is used for a qualifying purpose. The tax applies to properties valued at more than £500,000.

Stamp Duty Land Tax (SDLT), Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT)

A supplement applies for all three taxes where an additional residential property is purchased for more than £40,000 (unless replacing a main residence). It is also payable by all corporate purchasers. The rate is 3% (LBTT: 4%) of the total purchase price.

For SDLT:

– First-time buyers purchasing a property of up to £500,000 pay a nil rate on the first £300,000 of purchase price.

– A rate of 15% may apply to the total purchase price, where the property is valued above £500,000 and purchased by a ‘non-natural person’ (e.g. a company).

For LBTT, first-time buyer relief increases the nil rate band to £175,000.

Value Added Tax

Most businesses above the registration threshold must comply with the Making Tax Digital requirements.

Flat Rate Scheme (FRS)

If using FRS, the VAT paid by the business is a fixed percentage (based on business category) of 'FRS turnover' rather than the net of output tax over input tax. Input tax is usually not recoverable.

Cash accounting and Annual accounting schemes

Option to tax property

Notify HMRC within 30 days.

Inheritance Tax

†RNRB is available for transfers of a main residence to (broadly) direct descendents. It tapers away at the rate of £1 for every £2 of estate value above £2m.

*Up to 100% of the proportion of a deceased spouse’s/civil partner’s unused NRB and RNRB band may be claimed to increment the current NRB and RNRB when the survivor dies.

**Rate reduced to 36% if at least 10% of the relevant estate is left to charity. Unlimited exemption for transfers between spouses/civil partners, except if UK domiciled transferor and foreign domiciled transferee, where maximum exemption £325,000.

100% Business Property Relief (BPR) for all shareholdings in qualifying unquoted trading companies, qualifying unincorporated trading businesses and certain farmland/buildings.

Reduced tax charge on gifts within 7 years before death

Annual exemptions for lifetime gifts include £3,000 per donor and £250 per recipient.

Key Dates and Deadlines

*UK residential property 2020/21: CGT due within 30 days of completion.

†Non-residents with gains on any UK land and buildings must pay CGT within 30 days of completion, except in 2019/20 when already filing a self assessment tax return.

Corporation tax is due 9 months and 1 day from the end of the accounting period, unless a ‘large’ company paying by quarterly instalments.

Non-resident CGT return is due within 30 days of completion of sale of UK L&B by a non-resident.

Useful Rates

You are advised to consult us before acting on any information contained herein.