It’s fair to say that with everything going on at the moment, the start of the new tax year could easily pass you by. But in this week’s blog, we break down what the start of the new tax year means for you, and what allowances are available to you in 2020/21.
For the first time in ten years, the personal allowance for income tax has not increased. Therefore, for the new tax year, the personal allowance remains the same at £12,500.
Rates of income tax
Again, this has not changed this tax year, and the income tax bands remain at:
Basic rate- £1- £37,500 20%
Higher rate- £37,501- £150,000 40%
Additional rate- £150,001 + 45%
Tax free dividend allowance
This also remains the same for the new tax year, with the first
£2,000 of dividends received being tax free. Any further dividends are taxed as follows:
Basic rate- 7.5%
Higher rate- 32.5%
Additional rate- 38.1%
Personal savings allowance
Again, this remains the same, as £1000 for basic rate tax payers, and
£500 for higher rate tax payers.
National Insurance thresholds
These have increased as follows (the figures below are £ per week):
Lower Earnings Limit- £120
Primary Threshold- £183
Secondary Threshold- £169
Upper Earnings Limit- £962
The rates of national insurance themselves have not changed.
For 20/21 this has increased to £4,000 per year per employer. However, the eligibility criteria has changed so do ensure that you are entitled to claim this.
Class 2 and 4 NI (sole traders)
Class 2 – The Small Profits Threshold has increased to £6,475 (annual), and the contribution rate above this has also increased to £3.05/week.
Class 4 – The Lower Profits Limit has also increased to £9,500. Over this (but below the Upper Profits Limit of £50,000), the NI rate remains the same at 9%, and over £50k, remains at 2%.
Capital Gains Tax
The rates of CGT have not changed, but the Annual Exemption Allowance has increased slightly to £12,300.
This is still available at 10%, but the lifetime limit has now been capped at £1million.
PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.
We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.
Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.
We pride ourselves on our client satisfaction and customer service and were awarded ‘Best Contractor Accountancy’ firm 2020 in The Contracting Awards and ‘Welwyn Hatfield Business of the Year 2019’ in the SME Hertfordshire awards.
To find out how we can help you please get in touch now.