What's changing in the new tax year?

With the 2020/2021 tax year beginning, it’s a good time to look at some of the changes to be introduced and consider how they might impact you.

The threshold for National Insurance contributions (NICs) will rise from £8,632 to £9,500 in the 2020/2021 tax year. So earnings up to that amount will be exempt from National Insurance. This will save a typical employee around £104 and a typical self-employed person around £78 each year.¹

The national living wage for people aged over 25 will rise by 6.2% to £8.72 per hour.² There will also be increases to the national minimum wage for those aged under 25.

State Pensions will rise by 3.9% in 2020/2021.³ Those on the full new single-tier State Pension will receive an extra £6.60 per week and those on the basic State Pension will receive an extra £5.05 per week.³

The amount you can save in a Junior ISA or Child Trust Fund will rise from £4,368 to £9,000 per child in the 2020/2021 tax year.⁴ Meanwhile, the allowance for ISAs will remain at £20,000.

Non UK residents will incur a 2% stamp duty surcharge when buying residential property in England and Northern Ireland, but not until 1 April 2021. The government said this would help control house price inflation and help get UK residents onto the housing ladder.⁴

The personal allowance (the tax-free amount you can earn) will stay at £12,500 for the 2020/2021 tax year. Alongside this, the basic rate limit (the 20% tax bracket) will stay at £37,500.⁵ This means you’re able to earn up to £50,000 before crossing the higher level of tax threshold.⁵ Different rates and bands apply to Scottish tax payers.

Explore more: What is an ISA?

If you want to make the most of the tax-free allowances or you’re looking to boost your savings pot this financial year, read our guide on how to save money.

¹https://www.gov.uk/government/publications/budget-2020-documents/budget-2020

²https://www.gov.uk/national-minimum-wage-rates

³https://www.which.co.uk/news/2019/10/state-pension-to-rise-by-up-to-343-a-year-in-2020

⁴https://www.gov.uk/government/publications/budget-2020-documents/budget-2020

⁵https://www.gov.uk/government/publications/income-tax-personal-allowance-and-basic-rate-limit-from-2019-to-2020/income-tax-personal-allowance-and-basic-rate-limit-from-2019-20