Tax rates and allowances

 Income tax rates and taxable bands

 

 

  UK Excluding Scotland Scotland
Rate 2021/22 to 2025/26* 2020/21 2021/22 2020/21
Starting rate for savings: 0% (1)
Starting rate (Scotland only): 19%
£0-£5,000
N/A
£0-£5,000
N/A
£0-£5,000
£0-£2,097
£0-£5,000
£0-£2,085
Basic rate: 20%
Intermediate rate (Scotland only): 21%
£0-£37,700
N/A
£0-£37,500
N/A
£2,098-£12,726
£12,727-£31,092
£2,086-£12,658
£12,659 – £30,930
Higher rate: 40%
Scotland: 41% 
£37,701 – £150,000 £37,501 – £150,000 £31,093 – £150,000 £30,931 – £150,000
Additional rate: 45%
Scotland: 46% 
Over £150,000 Over £150,000 Over £150,000 Over £150,000

(1) If your non-savings income is above this limit then the 0 per cent starting rate for savings will not apply.
The first £2000 of dividends are taxed at 0%, if there is basic rate band remaining then the rate of tax is 7.5%, 32.5% for the remaining higher rate band and 38.1% for the additional rate band. There is also a savings allowance of £1000 for basic rate taxpayers and £500 for higher rate tax payers but not additional rate taxpayers.

*The UK Government has announced that the rates and Income Tax allowances for England and Northern Ireland will remain the same until 2025/26. The Income Tax rates for Wales are currently the same as England and Northern Ireland but this may change in future years.

 

Income tax allowances

 

Income tax allowances 2021/22 to 2025/26* 2020/21
Personal allowance (2) £12,500 £12,500
Income limit for personal allowance £100,000 £100,000
Married couple’s allowance for those born before 6th April 1935 (3) (4) £9,125 £9,075
Income limit for age-related allowances £30,400 £30,200
Minimum amount of married couple’s allowance £3,510 £3,530
Maximum marriage allowance transfer (5) £1,260 £1,250

(2) The Personal Allowance reduces by £1 for every £2 of income above £100,000. This reduction applies irrespective of age.

(3) These age related allowances reduce by £1 for every £2 of income above the income limit for age-related allowances. Unless income is in excess of £100,000 the allowance will never be less than the basic Personal Allowance or minimum amount of Married Couple’s Allowance.

(4) Tax relief for the Married Couple’s Allowance is given at the rate of 10 per cent.

(5) One individual must be a basic rate tax payer and the other must have income less than the personal allowance.

 

Capital gains tax rates and annual tax free allowances

 

Capital gains annual exemption 2020-21 to 2025/26* 2019-20
Annual individuals, personal representatives and trustees for disabled people £12,300 £12,000

Rates for capital gains tax

Rates for individuals 10%/18%/20%/28%. Rates for individuals are 10%/18% up to the limit of the remaining basic rate tax band (if any) after deducting taxable income and 20%/28% on gains above that limit. The extra 8% applies on disposals of residential properties. 10 per cent for gains qualifying for Entrepreneurs Relief.

 

Inheritance tax thresholds

 

The Inheritance Tax threshold (or nil rate band) is £325,000.

If the estate – including any assets held in trust and gifts made within seven years of death – is more than the threshold, Inheritance Tax will be due at 40% on the amount over the nil rate band (36% if more than 10% of the estate is left to charity in the will).

Additional nil rate band for a transfer of a main residence to a direct descendant £175,000 provided that the estate is less than £2million.

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