As the Conservative Party manifesto had promised no increase in the rate of income tax it was not surprising that all income tax rates for 2020-21 have been frozen at those in place for the last five years.
The main rates are:
• 20%, 40% and 45% on earned income and savings
• 7.5%, 32.5% and 38.1% on dividend income
Taxpayers resident in Scotland pay tax on earned income and rental profits at rates between 19% and 46% but at the same rates as other UK residents on savings, dividends and gains.
The personal allowance is fixed at £12,500 but is reduced to nil if the taxpayer’s income exceeds £125,000.
The first £1,000 of savings income is free of tax, reduced to £500 where the taxpayer pays tax at 40% and removed entirely for taxpayers in the 45% bracket.
There is good news for home workers as their employer will be able to pay them a tax-free allowance of £6 per week from 6 April 2020 to cover the additional costs of working from home. This is an increase from £4 per week which has applied for some years.
