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Tax rates for 2020/2021

Income tax allowances and bands

Please note it is taxable income which applies in this assessment, including earnings, pensions in payment, cash interest, fixed interest income, dividends and rent. ISA income is not included.

Income tax - main personal allowances

Allowance

2020/21

Personal Allowance

£12,500

Transferable tax allowance for married couples/civil partners

£1,250

Personal Savings Allowance (PSA)

£1,000 for Basic rate taxpayers £500 for Higher rate taxpayers Not available for Additional rate taxpayers

Dividend Allowance

£2,000

A Married Couple’s allowance (born pre 6/4/35) or Blind Person’s allowance may also apply.


The transferrable tax allowance only applies where neither individual is a higher or additional rate tax payer. The maximum tax reduction available is £250.

The personal allowance reduces by £1 for every £2 of income above £100,000. The personal allowance is lost if taxable income exceeds £125,000 (2020/21).


The dividend and personal savings allowance apply after the personal allowance and are calculated using UK, not Scottish, rates. Anything within these allowances still count towards the basic and/or higher rate tax bands.


Income tax - bands (after any personal allowance)

UK excluding Scottish Earned or Pension Income

Tax Band Income tax rate


Dividend tax rate

Starting Rate for Savings

£1 - £5,000

0%

N/A


Basic rate

£1 - £37,500

20%

7.5%


Higher Rate

£37,501 - £150,000

40%

32.5%


Additional Rate

£150,000+

45%

38.1%


Higher rate threshold (standard personal allowance + basic rate band) is £50,000.


Non-savings income uses up the starting rate for savings.


Scotland only


Scottish tax bands only apply to earned or pension income. The rates above apply to savings or dividend income.


Tax Band income tax rate


Starter Rate

£12,500 - £14,585

19%


Basic rate

£14,585 - £25,158

20%


Intermediate Rate

£25,158 - £43,430

21%


Higher Rate

£43,430 - £150,000

41%


Additional Rate

£150,000+

46%


Higher rate threshold (Standard personal allowance + starter rate band + basic rate band + intermediate rate band) is £43,430.

Capital gains tax (CGT)

CGT is charged on any profits (the 'gains') you make when you sell (or transfer) shares and unit trusts or other assets such as a second home. If the total of any gains realised in the year, minus any losses, exceeds your annual allowance the excess is liable to CGT.


CGT has a different tax rate depending upon whether it applies to business assets or non-business assets.


Annual capital gains tax allowance: £12,300 2020/21

2020/21 Capital gains tax rates (non-business assets)


Capital gains Tax rate


Gains which when added to taxable income fall in the UK basic rate tax band

10%


Gains which when added to taxable income fall in the UK higher or UK additional rate tax band

20%

Capital gains on residential property which is not a main residence will be taxed at 18% and 28% instead of 10% and 20%.


Entrepreneurs' Relief (Business assets)


Business assets are generally a share (or interest) in the company or firm you work for. Entrepreneurs' Relief is subject to meeting certain criteria


Inheritance tax (IHT)

Value of estate Tax rate


£1 - £325,000 (known as IHT threshold or nil rate band)

0%

Over £325,000

40%

Tax year Residence nil rate band


2017/18

£100,000


2018/19

£125,000


2020/21

£150,000


2020/21

£175,000



Stamp duty

Stamp duty reserve tax (SDRT)


0.5% rounded up to the nearest penny when you buy shares that settled via electronic paperless system.


Standard stamp duty


When you buy shares worth over £1,000 that settle via a paper system the tax charge is 0.5% rounded up to the nearest penny. There is no charge if the shares are worth less than £1,000.


Stamp duty land tax (SDLT) - residential


Charged when you buy residential land or property.


Purchase price or value


Tax rate paid on portion of purchase price

Tax rate paid on second and subsequent houses


Up to £125,000

0%

3%


£125,001 to £250,000

2%

5%


£250,001 to £925,000

5%

8%


£925,001 to £1,500,000

10%

13%


Over £1,500,000

12%

15%


Please note Stamp duty land tax (SDLT) is not charged in Scotland. A Land and Buildings Transaction tax (LBTT) will be applied instead. Please view here for more details.


Discretionary trusts

Tax rate


Capital gains tax allowance £6,150 (divided by the number of trusts settled subject to a minimum of £1,230 per trust)


Capital gains tax rate 20% / 28% for residential property

Inheritance tax (transfers into discretionary trusts)

20%


Income tax rate (up to £1,000 per annum)

20%


Income tax rate (above £1,000 per annum)

45%


Dividend tax rate (up to £1,000 per annum)

7.5%


Dividend tax rate (above £1,000 per annum)

38.1%


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