As the Conservative Party manifesto had promised no increase in the rate of income tax it was not surprising that all income tax rates for 2020-21 have been frozen at those in place for the last five years.
The main rates are:
• 20%, 40% and 45% on earned income and savings
• 7.5%, 32.5% and 38.1% on dividend income
Taxpayers resident in Scotland pay tax on earned income and rental profits at rates between 19% and 46% but at the same rates as other UK residents on savings, dividends and gains.
The personal allowance is fixed at £12,500 but is reduced to nil if the taxpayer’s income exceeds £125,000.
The first £1,000 of savings income is free of tax, reduced to £500 where the taxpayer pays tax at 40% and removed entirely for taxpayers in the 45% bracket.
There is good news for home workers as their employer will be able to pay them a tax-free allowance of £6 per week from 6 April 2020 to cover the additional costs of working from home. This is an increase from £4 per week which has applied for some years.
This article is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or taking professional advice. The authors and the firm cannot accept any responsibility for loss arising from any person acting or refraining from acting on the basis of the material included herein.