Tax Rates 2020/21

Mar 23, 2020
Author: Hawsons
Corporate Tax | Personal Tax | Tax | VAT
Tax rates

Introduction

We have summarised the key rates and allowances which are fundamental to our business and personal lives. We are sure that you will find them a useful point of reference and have set out below a few examples of how they can be used.

Personal tax rates

As the UK tax system becomes more devolved, it is important to keep abreast of the changes taking place in the Scottish and Welsh income tax rates and bands. We have summarised the relevant information together with the rates and allowances which apply to investment income.

Buying property

If you buy property then property taxes payable are different depending where the property is in the United Kingdom. Stamp Duty Land Tax is payable on property in England and Northern Ireland, whilst Land and Buildings Transaction Tax is payable on property in Scotland and Land Transaction Tax on property in Wales. Our tax rates highlight the main rates so that you can consider the potential cost of buying property.

Business or asset sale

If you sell an asset such as shares or your business, capital gains tax may be due. Our tax rates highlight the main rates and reliefs so that you can consider the tax bill that may arise.

Rates for businesses

If you run a business, obtaining the right allowances on equipment that your business buys can affect the tax that your business has to pay each year. We have summarised the main allowances that are available.

Rates for employees

There are changes to the way company car benefits are calculated this year. Our guide explains how these are computed to help ensure that you are paying the correct amount of tax.

Rates that affect us all

Long term planning for a comfortable retirement can never start too early. Our tax rates explain how much can be contributed to an approved pension scheme each year tax efficiently.

Our tax rates contain the main inheritance tax rates and exemptions but early planning can mitigate these tremendously.


These rates are intended for use as a quick point of reference. Should you require any further information, have a simple question or require detailed advice we are only a phone call away.

Capital Allowances - Plant and Machinery
  • The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.
  • Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building (‘integral features’), computers, cars, vans and similar equipment used in a business.
  • There are special rules for cars and certain ‘environmentally friendly’ equipment.
  • Plant and machinery allowances may be available to owners of commercial property which is let out to a business.
  • The Annual Investment Allowance (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.
  • Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.
  • A Structures and Buildings Allowance of 3% (2% prior to April 2020) may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

  • Special rules apply to accounting periods straddling the dates shown in the tables below.
  • The AIA may need to be shared between certain businesses under common ownership.

AIA limits – companies

Expenditure incurred:

Annual limit
  £
From 1 January 2019 to 31 December 2020 1,000,000
From 1 January 2021 200,000

AIA limits – sole traders and partnerships

Expenditure incurred:

Annual limit
  £
From 1 January 2019 to 31 December 2020 1,000,000
From 1 January 2021 200,000

Other plant and machinery allowances

  • Expenditure upon which AIA is not given/claimed will obtain relief through the ‘main rate pool’ or the ‘special rate pool’ rather than each item being dealt with separately.
  • The annual rate of WDA is 18% in the ‘main rate pool’ and 6% in the ‘special rate pool’.
  • A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Cars

  • For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.
  • AIA is not available on any car but a 100% first year allowance may be available on certain cars. To qualify for first year allowance, the car must be purchased new.

Cars acquired from April 2018

Emissions (g/km)

Pool

Allowance
≤50 Main rate 100% FYA
≤ 110 Main rate 18% WDA
>110 Special rate 6% WDA
Capital Gains Tax
  • CGT is payable by individuals, trustees and personal representatives (PRs). Companies pay corporation tax on their capital gains.
  • There are annual tax-free allowances (the ‘annual exempt amount’) for individuals, trustees and PRs. Companies do not have an annual exempt amount.
  • For individuals, net gains are added to total taxable income to determine the appropriate rate of tax. The standard rate applies only to the net gains which, when added to total taxable income, do not exceed the basic rate band.
  • Gains which qualify for Investors’ Relief are charged at 10% for the first £10m of qualifying gains.
  • Gains which qualify for Entrepreneurs’ Relief are charged at 10% for the first £1 million.

Rates and annual exemption

Individuals 2020/21
  £
Exemption 12,300
Standard rate 10%
Higher rate 20%

The higher rate applies to higher rate and additional rate taxpayers.

Additionally, higher rates of 18% and 28% may apply to the disposal of certain residential property.

Trusts 2020/21
  £
Exemption 6,150
Rate 20%
Car Benefits
  • The value of the car benefit is calculated by multiplying the car’s list price, when new, by a percentage linked to the car’s CO2 emissions.  For cars registered on or after 6 April 2020, the CO2 emissions will be measured using the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).  The WLTP emissions figures are likely to be higher for most vehicles, as they represent ‘real world driving conditions’ and therefore the benefit in kind figures for newly registered vehicles will also likely be higher.  To mitigate this and to prevent a distorting effect on the car market, a new set of benefit rates will apply to new cars registered from 6 April 2020.  The rates will be reduced by 2% for 2020-21 and by 1% for 2021-22, before returning to the usual rates from 2022-23.
  • Other points to note are that a 4% supplement is generally added for diesel cars and the overall maximum percentage is capped at 37%.  The list price is increased for accessories added (either at registration or at a later date) and is reduced for capital contributions made by the employee up to £5,000.  Special rules may apply to cars provided for disabled employees.  For cars registered before 1 January 1998 and cars with no agreed CO2 emissions, the benefit in kind value calculated as a percentage of list price, graduated by the engine capacity.

2020/21

Cars registered pre 6/4/20

Cars registered after 5/4/20

CO 2 emissions

(g/km)

 % of list price taxed % of list price taxed
0 0 0

1–50

Electric range >130

70-129

40-69

30-39

<30

2

5

8

12

14

0

3

6

10

12
51–54 15 13
55-59 16 14
60-64 17 15
65-69 18 16
70-74 19 17
75-79 20 18
80-84 21 19
85-89 22 20
90-94 23 21
95-99 24 22
100-104 25 23
105-109 26 24
110-114 27 25
115-119 28 26
120-124 29 27
125-129 30 28
130-134 31 29
135-139 32 30
140-144 33 31
145-149 34 32
150-154 35 33
155-159 36 34
160-164 37 35
165-169 37 36
170 and above 37 37
Car Fuel Benefit
  • Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
  • The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
  • The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.
Car fuel benefit 2020/21  
Fuel charge multiplier £24,500
Child Benefit
  • Car fuel benefit applies if an employee has the benefit of private fuel for a company car.
  • The benefit is calculated by applying the percentage used to calculate the car benefit by a ‘fuel charge multiplier’.
  • The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.
Car fuel benefit 2020/21  
Fuel charge multiplier £24,500
Corporation Tax Rates
  • Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.
  • If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.
  • The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% when the Northern Ireland Executive demonstrates its finances are on a sustainable footing.
Year to 31.3.21 Rate %
All profits 19
Employee Statutory Payments

Statutory pay

  • Payments may be required from an employer if an employee is not at work for a variety of reasons.
  • There are detailed conditions for an employee to qualify for any of these statutory payments.
  • Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

Statutory Sick Pay

  • Payments may be required from an employer if an employee is too ill to work.
  • SSP is generally payable for a period up to 28 weeks.

SSP support during coronavirus outbreak

The government has temporarily made SSP more accessible to employees in response to the coronavirus outbreak. During the outbreak SSP is available from the first day of absence, including for those self-isolating or caring for others.

The government is supporting small and medium-sized businesses and employers to cope with the extra costs of paying coronavirus related SSP by refunding eligible SSP costs.

Statutory Maternity Pay

  • Payments may be required from an employer when an employee takes time off to have a baby.
  • SMP is payable for a period up to 39 weeks.

Statutory Paternity Pay

  • Payments may be required from an employer when an employee takes time off during their partner’s Statutory Maternity Pay period.
  • Payment is for a period of either one or two complete weeks.

Shared Parental Pay

  • Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.
  • Payment is for up to a maximum of 37 weeks and is dependent on the mother’s unused SMP period.

Statutory Adoption Pay

  • Payments may be required from an employer when an employee takes time off when they adopt a child.
  • Payment is for a period up to 39 weeks.

Statutory Parental Bereavement Pay

  • Payments may be required from an employer when parents take time off following the death of a child or a stillbirth.
  • Payment is for up to a maximum of two weeks.
2020/21 Statutory pay rates –
average weekly earnings £120 or over		  
Statutory Sick Pay £95.85
Statutory Maternity Pay  
First six weeks 90% of weekly earnings
Next 33 weeks £151.20
Statutory Paternity Pay – two weeks £151.20
Statutory Adoption Pay – 39 weeks  
First six weeks 90% of weekly earnings
Next 33 weeks £151.20
Shared Parental Pay £151.20
Statutory Parental Bereavement Pay – two weeks £151.20

With the exception of Statutory Sick Pay, statutory payments may
be payable at 90% average weekly earnings throughout the payment period
in certain circumstances. This applies where 90% weekly earnings
are less than the standard rate of £151.20.

Income Tax Allowances

A personal allowance gives an individual an annual amount of income free from income tax.

Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual’s ‘adjusted net income’ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple’s allowance but this is reduced if ‘adjusted net income’ is above the married couple’s allowance income limit (see table below).

Marriage allowance – 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple’s allowance.

Income tax personal allowances £
Personal Allowance 12,500
Marriage Allowance 1,250
Blind person’s allowance 2,500
Married couple’s allowance
Either partner born before 6 April 1935		  
– Maximum reduction in tax bill 907.50
– Minimum reduction in tax bill 351.10
Married couple’s allowance income limit
Reduce married couple’s allowance by £1 for every £2 of ‘adjusted net income’ above this limit		 30,200
Income Tax Rates - Across the UK
  • Income tax applies to the amount of income after deduction of personal allowances.
  • Income is taxed in a specific order with savings and dividend income taxed last.
  • Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.
  • The starting rate band is only applicable to savings income. The 0% rate is not available if the taxable amount of non-savings income exceeds the starting rate band.
  • The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.
  • Income tax is devolved to Wales on non-savings and non-dividend income.

Income tax rates

Band of taxable income Rate Rate if dividends
£   % %
0 – 5,000 Starting rate for savings 0 N/A
0 – 37,500 Basic rate 20 7.5
37,501 – 150,000 Higher rate 40 32.5
Over 150,000 Additional rate 45 38.1
Special rates for savings and dividend income falling into above bands of taxable income
Savings Allowance
Basic rate taxpayers 1,000 0  
Higher rate taxpayers 500 0  
Additional rate taxpayers Nil N/A  
Dividend Allowance
for all taxpayers 2,000   0
Income Tax Rate - Scotland
  • Scottish resident taxpayers are liable on non-savings and non-dividend income as set out below.
  • Savings income and dividend income are taxed using UK tax rates and bands.
Band of taxable income Rate
£   %
0 – 2,085 Starter rate 19
2,086 – 12,658 Basic rate 20
12,659 – 30,930 Intermediate rate 21
30,931 – 150,000 Higher rate 41
Over 150,000 Top rate 46
Income Tax Rates - Wales
  • Income tax is devolved to Wales.
  • Welsh resident taxpayers continue to pay the same overall income tax rates using the UK rates and bands.
  • The total rate of income tax = UK income tax + Welsh rate of income tax
  • Savings income and dividend income are taxed using UK tax rates and bands.
Band of taxable income UK Rate Welsh Rate Total Rate
£   % % %
0 – 37,500 Basic rate 10 10 20
37,501 – 150,000 Higher rate 30 10 40
Over 150,000 Additional rate 35 10 45
Individual Savings Account (ISA)

The income from ISA investments is exempt from income tax. Any capital gains made on investments held in an ISA are exempt from capital gains tax.

Savers are able to subscribe any amounts into a cash ISA, a stocks and shares ISA or an innovative finance ISA subject to not exceeding the overall annual investment limit.

Investors may transfer their investments from one kind of ISA to another.

The Lifetime ISA is available for those aged between 18 and 40. Save up to £4,000 each year up until the age of 50, and receive a government bonus of 25% (a bonus of up to £1,000 a year). Savers can use some or all of the money to buy their first home, or keep it until they are aged 60 when the account can be accessed tax free. Conditions apply to the account holder and property purchased.  Penalties apply if funds are withdrawn in other circumstances.

A Help to Buy ISA provides a tax free savings account for first time buyers wishing to save for a home. The scheme provides a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings. The bonus will be paid in the form of a voucher when the first home is purchased. Conditions apply to the account holder and to the property purchased. Help to Buy ISAs closed to new savers on 30 November 2019. Existing holders can continue saving until 30 November 2029 and will have until 1 December 2030 to claim their bonus.

ISA limits 2020/21  
Overall annual investment limit £20,000
Junior ISA annual investment limit £9,000
Help to Buy ISA monthly subscription limit £200
Lifetime ISA annual investment limit £4,000
Inheritance Tax (IHT)
  • IHT may be payable when an individual’s estate is worth more than the IHT nil rate band when they die.
  • Lifetime and death transfers between UK domiciled spouses are exempt from IHT.
  • For 2020/21, a further nil rate band of £175,000 (2019/20 – £150,000) may be available in relation to current or former residences.
  • The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.
  • There are reliefs for some business and farming assets which reduce their value for IHT purposes.
  • IHT may also be payable on gifts made in an individual’s lifetime but within seven years of death.
  • Some lifetime gifts are exempt.
  • Transfers of assets into trust made in an individual’s lifetime may be subject to an immediate charge but at lifetime rates.
  • There are also charges on some trusts.

IHT rates and nil rate band 2020/21 and 2019/20

IHT nil rate £325,000
Lifetime rate 20%
Death rate 40%
Death rate if sufficient charitable legacies made 36%

IHT reliefs for lifetime gifts

Annual exemption £3,000
Small gifts £250
Marriage  
– parent £5,000
– grandparent £2,500
– bride/groom £2,500
– other £1,000

IHT – reduced charge on gifts within seven years of death

Years before death % of death charge
0-3 100
3-4 80
4-5 60
5-6 40
6-7 20
 
 

 

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

LBTT (Residential property)

Consideration (£) Rate
0 – 145,000 0%
145,001 – 250,000 2%
250,001 – 325,000 5%
325,001 – 750,000 10%
750,001 and above 12%

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief raises the zero rate tax threshold for first-time buyers from £145,000 to £175,000.

LBTT (Non-residential)

Consideration (£) Rate
0 – 150,000 0%
150,001 – 250,000 1%
Over 250,000 5%

The rates apply to the portion of the total value which falls within each band.

Land Transaction Tax

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

LTT (Residential property)

Consideration (£) Rate
0 – 180,000 0%
180,001 – 250,000 3.5%
250,001 – 400,000 5%
400,001 – 750,000 7.5%
750,001 – 1,500,000 10%
1,500,000 and above 12%

The rates apply to the portion of the total value which falls within each band. Residential rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

LTT (Non-residential)

Consideration (£) Rate
0 – 150,000 0%
150,001 – 250,000 1%
250,001 – 1,000,000 5%
Over 1,000,000 6%

The rates apply to the portion of the total value which falls within each band.

Mileage Allowance Payments (MAPS) for Employees
  • MAPs represent the maximum tax free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.
  • An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.
  • If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

MAP rates per business mile 2020/21 and 2019/20

Cars and vans Rate per mile
Up to 10,000 miles 45p
Over 10,000 miles 25p
Bicycles 20p
Motorcycles 24p
Minimum Wage
  • National Minimum Wage rates apply to employees up to the age of 24.
  • National Living Wage (NLW) rates apply to employees 25 and over.
  • The Apprentice rate applies to apprentices under 19, or 19 and over in the first year of apprenticeship.
  • Penalties apply to employers who fail to pay minimum wages.
Age NLW 21-24 18-20 16-17

Apprentice
From 1 April 2020 £8.72 £8.20 £6.45 £4.55 £4.15
National Insurance Contributions (NICS) - Rates and Allowances
  • Employees start paying Class 1 NIC from age 16 (if sufficient earnings).
  • Employers pay Class 1 NIC in accordance with the table below.
  • Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold.
  • Employees’ Class 1 NIC stop when they reach their State Pension age. The employer’s contribution continues.

Employees – Class 1 – 2020/21

Earnings per week %
Up to £183 Nil
£183.01 – £962 12
Over £962 2

Entitlement to state pension and other contribution-based benefits is retained for earnings between £120 and £183 per week.

Employers – Class 1 – 2020/21

Earnings per week %
Up to £169 Nil
Over £169 13.8
Upper Secondary Threshold (for under 21s and apprentices under 25)
Up to £962		 0%

Other National Insurance payable by employers

Class 1A – 13.8% on broadly all taxable benefits provided to employees and on certain taxable termination payments in excess of £30,000

Class 1B – 13.8% on taxable PAYE Settlement Agreements

Self-employed – Class 2 and 4

  • A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits)
  • Class 2 NIC stop when a person reaches State Pension age
  • Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

Self-employed – Class 2 – 2020/21

Flat rate per week £3.05
Small Profits Threshold £6,475 per year

No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying Class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.  

Class 4 – 2020/21

Annual profits %
Up to £9,500 Nil
£9,500.01 – £50,000 9
Over £50,000 2

Class 3

  • A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.
  • Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Class 3 – 2020/21

Flat rate per week £15.30

Pensions Automatic Enrolment

Auto enrolment places duties on employers to automatically enrol ‘workers’ into a work based pension scheme. Employers are required to automatically enrol all ‘eligible jobholders’ into a qualifying pension scheme and pay pension contributions on their behalf.

Employer minimum contribution Total minimum contribution
3% 8%

Where the employer does not make the total minimum contribution the employee is obliged to pay the balance.

  2020/21
Automatic enrolment earnings trigger £10,000
Qualifying earnings band – lower limit £6,240
Qualifying earnings band – upper limit £50,000
Pensions - Tax Relief on Pensions Contribution
  • Tax relief available for personal contributions is the higher of £3,600 (gross) or 100% of relevant earnings.
  • Any contributions in excess of £40,000, whether personal or by the employer, may be subject to income tax on the individual.
  • The limit may be reduced to £4,000 once money purchase pensions are accessed.
  • Where the £40,000 limit is not fully used it may be possible to carry the unused amount forward for three years.
  • The annual allowance is tapered for those with adjusted income over £240,000. For every £2 of income over £240,000 an individual’s annual allowance will be reduced by £1, down to a minimum of £4,000.
  • Employers will obtain tax relief on employer contributions if they are paid and made ‘wholly and exclusively’ for the purposes of the business. The tax relief for large contributions may be spread over several years.
Property Allowance
  • A property allowance is available to individuals.
  • The property allowance will not apply to partnership income or to income on which rent a room relief is given.
Income up to £1,000 Property income assessable NIL
Income over £1,000 Election to deduct £1,000 rather than the actual expenses
Self Assessments - Key Dates

31 January 2020 – First payment on account due for 2019/20 tax year.

31 July 2020 – Second payment on account for 2019/20 tax year.

5 October 2020 – Deadline for notifying HMRC of new sources of income (including the Child Benefit charge) if no tax return has been issued for 2019/20 tax year.

31 October 2020 – Deadline for submission of 2019/20 non-electronic returns.

30 December 2020 – Deadline for submission of 2019/20 electronic tax returns if ‘coding out’ of any underpayment is required.

31 January 2021 – Deadline for filing electronic tax returns for 2019/20. Balancing payment due for 2019/20 tax year. First payment on account due for 2020/21 tax year.

Stamp Duty

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy shares electronically Stamp Duty Reserve Tax (SDRT) is payable. For shares purchased using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.

Stamp Duty Land Tax (SDLT)
  • SDLT is payable on land and property transactions in England and Northern Ireland.
  • Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).
  • Property transactions in Wales are subject to Land Transaction Tax (LTT).

Residential property

The rates apply to the portion of the total value which falls within each band.

Consideration (£) Rate
0 – 125,000 0%
125,001 – 250,000 2%
250,001 – 925,000 5%
925,001 – 1,500,000 10%
1,500,001 and above 12%

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief

First-time buyers may be eligible for first-time buyer relief on purchases of residential property up to £500,000. The rates apply to the portion of the total value which falls within each band.

Consideration (£) Rate
0 – 300,000 0%
300,001 – 500,000 5%
for purchases over 500,000 normal rates apply

Non-residential SDLT rates

Consideration (£) Rate
0 – 150,000 0%
150,001 – 250,000 2%
Over 250,000 5%

Payable on consideration which falls in each band.

State Pensions
  • The basic State Pension is a regular payment from the government that an individual may be entitled to when they reach State Pension age.
  • The basic State Pension depends on the number of years an individual has paid National Insurance or has National Insurance credits, eg while unemployed or claiming certain benefits.
  • To receive the basic State Pension an individual must have paid or been credited with National Insurance contributions (NIC).
  • In 2016 the State Pension was reformed into a single-tier new State Pension. In order to benefit from the full amount the individual will need 35 years, rather than the previous 30 years of NIC or credits for the full amount, with pro-rating where 35 years is not achieved. You will usually need 10 qualifying years to get any State Pension. The amount an individual receives can be higher or lower depending on their National Insurance record. It will only be higher if you have over a certain amount of Additional State Pension.
  • Currently an individual may also be entitled to the Additional State Pension. How much an individual gets depends on the number of qualifying years of NIC, the amount of earnings and whether the individual has been contracted out of the scheme.
Weekly State Pension 2020/21  
Basic – single person £134.25
New State Pension £175.20
Tax reliefs for Individuals

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. Individuals are entitled to relief on investments in certain unquoted trading companies through EIS. A junior version of EIS the SEIS is also available.

Maximum investment per annum £1,000,000
Additional investment limit where investing in knowledge-intensive companies £1,000,000
Income tax relief 30%
CGT treatment on disposal if held for 3 years Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. SEIS is a junior version of EIS.

Maximum investment per annum £100,000
Income tax relief 50%
CGT treatment on disposal if held for 3 years Exempt

An individual who makes a capital gain on another asset and uses the amount of the gain to make a SEIS investment will not pay tax on 50% of the gain (subject to certain conditions).

Social Investment Relief (SIR)

Social Investment Relief (SIR) is designed to encourage private individuals to invest in social enterprises including charities. Individuals are entitled to relief on their investment:

Maximum investment per annum £1,000,000
Income tax relief 30%
CGT treatment on disposal if held for 3 years Exempt

Capital gains from the disposal of other assets may be deferred by making a SIR investment.

(All reliefs are subject to detailed conditions being met.)

Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment. Individuals are entitled to relief on investments in VCTs.

Maximum investment per annum £200,000
Income tax relief 30%
Dividend income Exempt
Capital gains treatment on disposal Exempt
Trade Allowances
  • A Trade Allowance is available to individuals.
  • There is an equivalent rule for certain miscellaneous income. This will apply to the extent that the £1,000 trading allowance is not used against trading income.
  • The trade allowance is not available against partnership income.
Income up to £1,000 Profits assessable NIL
Van Benefits
  • Van benefit is chargeable if the van is available for an employee’s private use.
  • A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.
  • The charges do not apply to vans if a ‘restricted private use condition’ is met throughout the year.
  • A reduced benefit charge may apply to vans which cannot emit CO2 when driven.
Van benefits 2020/21
Van benefit £3,490
Fuel benefit £666
VAT
  • Registered businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs.
  • Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
  • There are three rates: standard which applies to most goods and services, reduced rate for some goods and services such as home energy and zero rate goods and services, for example, most food and children’s clothes.
  • Some supplies are exempt from VAT for example postage stamps, financial and insurance transactions.
  • A business is required to register for VAT if the value of taxable supplies exceeds the annual registration limit.
  • The government has frozen the VAT registration and deregistration limits until 1 April 2022.
VAT – rates and limits  
Standard rate 20%
Reduced rate 5%
Annual Registration Limit
– from 1.4.20 – 31.3.21		 £85,000
Annual Deregistration Limit
– from 1.4.20 – 31.3.21		 £83,000
VAT Fuel Scale Charges

Businesses must use these new VAT fuel scale charges from the start of their next prescribed accounting period beginning on or after 1 May 2019.

CO2
band		 Gross monthly
£		 VAT
£		 Net
£
120 or less 49 8.17 40.83
125 73 12.17 60.83
130 78 13.00 65.00
135 83 13.83 69.17
140 88 14.67 73.33
145 93 15.50 77.50
150 98 16.33 81.67
155 103 17.17 85.83
160 107 17.83 89.17
165 113 18.83 94.17
170 117 19.50 97.50
175 122 20.33 101.67
180 128 21.33 106.87
185 132 22.00 110.00
190 137 22.83 114.17
195 143 23.83 119.17
200 147 24.50 122.50
205 152 25.33 126.67
210 157 26.17 130.83
215 162 27.00 135.00
220 167 27.83 139.17
225 or more 172 28.67 143.33
CO 2
band		 Gross 3 month period £ VAT
£		 Net
£
120 or less 147 24.50 122.50
125 222 37.00 185.00
130 236 39.33 196.67
135 250 41.67 208.33
140 265 44.17 220.83
145 280 46.67 233.33
150 295 49.17 245.83
155 310 51.67 258.33
160 325 54.17 270.83
165 340 56.67 283.33
170 354 59.00 295.00
175 369 61.50 307.50
180 384 64.00 320.00
185 399 66.50 332.50
190 414 69.00 345.00
195 429 71.50 357.50
200 444 74.00 370.00
205 458 76.33 381.67
210 473 78.83 394.17
215 487 81.17 405.83
220 502 83.67 418.33
225 or more 517 86.17 430.83
CO 2
band		 Annual gross
£		 VAT
£		 Net
£
120 or less 592 98.67 493.33
125 886 147.67 738.33
130 947 157.83 789.17
135 1,004 167.33 836.67
140 1,066 177.67 888.33
145 1,123 187.17 935.83
150 1,184 197.33 986.67
155 1,241 206.83 1,034.17
160 1,303 217.17 1,085.83
165 1,360 226.67 1,133.33
170 1,421 236.83 1,184.17
175 1,478 246.33 1,231.67
180 1,540 256.67 1,283.33
185 1,597 266.17 1,330.83
190 1,658 276.33 1,381.67
195 1,715 285.83 1,429.17
200 1,777 296.17 1,480.83
205 1,834 305.67 1,528.33
210 1,895 315.83 1,579.17
215 1,952 325.33 1,626.67
220 2,014 335.67 1,678.33
225 or more 2,071 345.17 1,725.83

Where the CO2 emission figure is not a multiple of five, the figure is rounded down to the next multiple of five to determine the level of the charge.

For a bi-fuel vehicle which has two CO2 emissions figures, the lower of the two figures should be used.

For cars which are too old to have a CO2 emissions figure, you should identify the CO2 band based on engine size. If its cylinder capacity is:

  • If its cylinder capacity is 1,400cc or less, use CO2 band 140
  • If its cylinder capacity exceeds 1,400cc but does not exceed 2,000cc, use CO2 band 175;
  • If its cylinder capacity exceeds 2,000cc, use CO2 band 225 or above.
Vehicle Excise Duty (VED) - Passenger Cars

For vehicles first registered on or after 1 April 2018, the VED or ‘Road Tax’ rate for the first 12 months is based on CO2 emissions shown on the V5 (Registration Document).

Subsequent years are charged at the standard rate. Cars with a list price of over £40,000 when new pay an additional rate of £320 per year on top of the standard rate, for 5 years.

New diesel vehicles that do not meet the Euro 6d emissions standard are charged a supplement on their First Year Rate to the effect of moving up by one VED band.

VED bands and rates for cars first registered on or after 1 April 2018

CO2 emissions (g/km) Standard rate First year rate
0 £0 £0
1-50 £150 £10
51-75 £150 £25
76-90 £150 £110
91-100 £150 £135
101-110 £150 £155
111-130 £150 £175
131-150 £150 £215
151-170 £150 £540
171-190 £150 £870
191-225 £150 £1,305
226-255 £150 £1,850
Over 255 £150 £2,175

VED bands and rates for cars registered on or after 1 March 2001 but before 1 April 2018

VED band CO 2 emissions (g/km) Standard rate
A Up to 100 £0
B 101-110 £20
C 111-120 £30
D 121-130 £130
E 131-140 £150
F 141-150 £165
G 151-165 £205
H 166-175 £240
I 176-185 £265
J 186-200 £305
K 201-225* £330
L 226-255 £565
M Over 255 £580

*Including cars emitting over 225g/km registered before 23 March 2006.

Disclaimer

This article is published for the information of clients. It provides only an overview of the regulations in force at the date of publication and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this publication can be accepted by the authors or the firm.