Here’s a brief resumé of some of the allowances and limits that may affect you:
There is no change to the Personal Allowance and Income Tax limits this year as the Government achieved its objective to raise the Personal Allowance to £12,500 one year earlier than planned. The tax-free personal allowance remains at £12,500 with income over £50,000 subject to 40% income tax and over £150,000 at the additional rate of 45%.
The ISA allowance remains at £20,000 having been increased to that level in 2017/18; however, the JISA allowance for children under the age of 18 was increased from £4,368 in 2019/20 to £9,000 for 2020/21.
There is an increase in the Capital Gains Exempt Amount to £12,300 for 2020/21; despite the stock market being in considerable turmoil, there are still some gains to be realised!
The New State Pension amount increases with September’s CPI figure to £175.20 per week; for pensioners who reached State Pension Age before 6th April 2016, the Basic State Pension increases to £134.25 per week with earnings-related state pension in addition. For those who are funding towards maximising their New State Pension entitlement through Voluntary National Insurance (NIC), the Class 3 NIC rate is £15.30 per week (£795.60 per annum).
The significant change announced to NIC in the recent budget was the increase in the Lower Earnings Threshold above which NIC is payable to £9,500 per year; whilst the earnings limit to qualify for certain benefits such as State Pension increases to £6,240.
For higher earners, the thresholds for taper relief for Annual Allowance purposes were increased to £240,000 and £312,000; anyone with total income over £312,000 will have a reduced Annual Allowance for pension savings of £4,000. Those with income between £150,000 and £300,000 may find they have an increased Annual Allowance for 2020/21 compared to previous years.
The Lifetime Allowance increases to £1,073,100.
All the announcements linked to the current COVID-19 pandemic are covered separately in our communications.