2020-21: UK Income Tax Rates, Allowances & Reliefs

With the 2019/20 tax year coming to a close on 5th April 2020, and the new 2020/21 tax year beginning on 6th April 2020, we have put together this quick guide to help you understand the personal income tax rates, allowances and reliefs that may be available to you. For taxpayers based in Scotland, rates and allowances for Scottish Income Tax may be found here.

Please Note: This post has been provided for your information only and does not constitute advice.

Personal Allowance

Income tax is charged in various stages based on the total amount of income you receive in a given tax year. The first stage is known as your Personal Allowance, and this is how much income you may receive each year without paying tax. The Personal Allowance for the 2020/21 tax year is £12,500. However, if you receive over £100k of income then you will lose your Personal Allowance at a rate of £1 for every £2 that you earn.

Income Tax Bands and Rates

Once you have used up your Personal Allowance for the year, the income you have earned above the tax-free Personal Allowance will be taxed incrementally depending on the amount you have earned. The tax bands, also known as tax brackets, for the 2020/21 year are as follows:

Tax BandTaxable IncomeTax Rate
Personal Allowance£0 – £12,5000%
Basic Rate£12,501 – £50,00020%
Higher Rate£50,001 – £150,00040%
Additional RateOver £150,00045%

Other Income Tax Allowances

In addition to the Personal Allowance, there are additional savings, investment, trading and non-trading allowances which may be claimed against the income you have earned. However, please note that the rules surrounding who may claim these allowances do vary and, both who may claim and how much they may claim, will not be the same in all cases.

Income SourceTax Free AllowanceFurther Information Available From
Savings InterestUp to £5000 pahttps://www.gov.uk/apply-tax-free-interest-on-savings
DividendsUp to £2000 pahttps://www.gov.uk/tax-on-dividends
Casual EarningsUp to £1000 pahttps://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#trade
Up to £1000 pahttps://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#property

Tax Relief

Tax relief functions in a similar way to the tax allowances mentioned above. However, instead of reducing your income, they are used to reduce your tax bill for the year. You may be eligible to claim relief from tax if you:

  • Have made contributions to your pension
  • Have made a charitable donation
  • Have paid maintenance to an ex-spouse or civil partner
  • Have spent time working on a ship outside of the U.K.
  • Are married or in a civil partnership
  • Have paid for work expenses and have not been reimbursed – e.g. travel to visit a client

Need Help?

We always recommend speaking to an experienced accountant for information tailored to your individual circumstances.

If you don’t have an accountant or you’re looking for a new one, get in touch with a member of the team on 01202 399111 or complete the form below.

Please Note: This post has been provided for your information only and does not constitute advice.