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.
National Insurance boost
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
National living wage for over 25s to increase
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 increase
Junior ISA limit increase
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-resident stamp duty surcharge
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
Tax bands and limits
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.