Tax-free allowances, limits and tax relief for 2020/21

The 6 April is the start of a new tax-year and in 2020/21 there are a few, but significant, changes that those saving for their children’s future or a pension should be aware of.

The amount of money that can be earned before paying income tax has not changed from the last tax year in England and Wales, while those in Scotland will now be able to earn slightly more before paying tax.
In England and Wales, those who earn less than £100,000 in the tax year will still receive the first £12,500 of their income tax-free. The £1,250 married allowance stays the same – this allows a non-taxpayer to transfer £1,250 of their personal allowance to their partner if their partner is a basic rate taxpayer.

In England and Wales, the income tax rates are:

Find out the income tax bands for Scotland by reading Moneyfacts’ Taxfacts.

Basic rate taxpayers do not have to pay tax on £1,000 of interest earned from savings and investments. Higher rate taxpayers have a reduced allowance of £500, while additional rate taxpayers receive no allowance at and must pay tax on all interest earned from their savings and investments.

Find out more about How savings are taxed and the personal savings allowance.

Savers can earn up to £2,000 in dividends before paying tax on these. Any dividend earnings above this amount will be taxed dependent on the relevant income tax band.

Find out the tax payable on dividends above £2,000 in the Moneyfacts Taxfacts guide.

The ISA limit remains at £20,000 for the 2020/21 tax year. This is the maximum amount savers can deposit into a cash ISA, stocks and shares ISA and/or innovative finance ISA. The limit for a Junior ISA has increased from £4,368 to £9,000 per year. Lifetime ISAs remain at a maximum of £4,000 per year.

The maximum annual allowance for pension contributions remained static at your annual salary, up to a maximum of £40,000 per tax year. The annual pension allowance is the maximum that can be saved into a pension and still earn tax relief. Any payments into a pension in the same tax year over this amount will incur an annual allowance charge.
In 2019/20, the tapered annual pension allowance increased from £150,000 to £240,000. The taper reduces the maximum annual pension allowance by £1 for every £2 earned above the maximum taper amount. This continues until earnings reach £312,000, at which point the pension allowance will remain at £10,000.

Moneyfacts has published 23 different tax allowances, limits and key data to help individuals and businesses be aware of these for the 2020/21 tax year. This includes:

• Pension rates
• Capital gains tax
• Inheritance tax
• Stamp duty and property transaction tax
• Corporation tax
• Capital allowances

Find out more detailed information on all of these changes, and more, in our dedicated tax tables for the year ahead.