Starting Rate for Savings

• You may get up to £5,000 of interest tax-free. This is your starting rate for savings.
• The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.
• You are not eligible for the starting rate for savings if your other income is £17,570 (£17,500 for 2020-21) or more.
• Your starting rate for savings is a maximum of £5,000. Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1.

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Personal Savings Allowance

You may also get up to £1,000 of interest tax-free depending on which Income Tax band you are in. This is your Personal Savings Allowance.

Personal Savings Allowance	2020-21	2021-22
Basic rate	£1,000	£1,000
Higher rate	£500	£500
Additional rate	£0	£0

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Personal Allowance (tax-free)

The standard Personal Allowance is the amount of income on which you do not have to pay tax.

Personal Allowance	2020-21	2021-22
Personal Allowance (if available)	£12,500	£12,570
Transferable Tax Allowance (Marriage Allowance)	£1,250	£1,257

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Income Tax Rates

The table shows the tax rates you pay in each band if you have a standard Personal Allowance (as per the above table).

Income Tax Rates	2020-21	2021-22
Basic Rate Band	£37,500	£37,700
Basic Rate	20%	20%
Higher Rate (for income in excess of the Personal Allowance plus Basic Rate Band)	40%	40%
Additional Rate (where income exceeds £150,000)	45%	45%
Dividend Ordinary Rate	7.50%	7.50%
Dividend Upper Rate	32.50%	32.50%
Dividend Additional Rate	38.10%	38.10%
Rent a Room Relief	£7,500	£7,500
Property Allowance	£1,000	£1,000

• Where an individual’s non-savings income is less than the starting rate for savings limit, the savings income will be taxable at the 0% starting rate for savings up to the limit. From 6th April 2019 the Starting Rate for Savings limit is the individual’s Personal Allowance plus the Starting Rate band of £5,000.
• Where an individual’s non-savings income exceeds the Starting Rate for Savings limit, the Starting Rate for Savings is reduced by £1 for every £1 of other income over the Personal Allowance.
• The first £2,000 of dividend is tax-free. The rate of tax applicable to dividends in excess of this amount is 7.5%/32.5%/ or 38.1% depending on the level of other income.
• For those with income over £100,000 the Personal Allowance is reduced by £1 for every £2 that the taxable income is in excess of £100,000.
• The rate of Income Tax applicable to trusts is 45% (dividend income 38.1%).

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Capital Gains Tax (GCT)

Capital Gains Tax is a tax payable on the profit of the disposal of an asset that has increased in value.

Capital Gains Tax (CGT)	2020-21	2021-22
Individuals Annual Exemption	£12,000	£12,300
Trusts Annual Exemption (generally)	£6,000	£6,150
Gains from residential property	20% / 28%	20% / 28%
All other gains	10% / 20%	10% / 20%

• Gains that when added to an individuals other income are within the Basic Rate Band will be taxed at the lower rate(s) and all other gains will be taxed at the Higher Rates.
• Special rules apply on disposals of leasehold interests of less than 50 years.
• The gain arising during a period when the property was the taxpayer’s Principal Private Residence is exempt and the last nine months of ownership (2020-21 – eighteen months) are deemed to be an additional period of Principal Private Residence.
• If a Principal Private Residence has at some time been a let property, then the gain arising in the period when the property was let may be reduced by the lettings relief capped at £40,000. Lettings relief will only apply where the owner is sharing occupancy of the home with the tenant(s) under the same roof.
• From 5th April 2020 all disposals of residential property must be reported and the tax paid within 30 days of the completion of the transaction.

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Annual Tax on Enveloped Dwellings (ATED)

Applies to residential properties held by non-natural persons and is subject to numerous exemptions and reliefs.

Property value	2020-21	2021-22
£0 – £500K	N/A	N/A
£500K – £1m	£3,650	£3,700
£1m – £2m	£7,400	£7,500
£2m – £5m	£24,800	£25,300
£5m – £10m	£57,900	£59,100
£10m – £20m	£116,110	£118,600
Over £20m	£232,350	£237,400

• For 2020-21 (and the next two years) the bands are bands of value as at 1st April 2017.
  For example if the house was worth £1.9m in April 2012, the 2017-18 tax would be £7,050; if the same house had gone up in value since 2012 and was worth £2.1m as at 1st April 2017, then the tax for 2020-21 would be £25,200. That is because they are valued once every five years.
• There are numerous reliefs including where the property has been let commercially. To claim a relief the owner MUST claim this relief on a full ATED return, which must be submitted annually.

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Stamp Duty Land Tax (SDLT)

• Special rates apply to purchases in Scotland and Wales. The following apply to England and Northern Ireland only.
• Most purpose-built student accommodation, hotel rooms and care home rooms are treated as commercial property.
• Special rates (not included here) apply to the purchase of a new lease.

Residential property

Purchase of the first or main property by an individual	SDLT rate
Up to £125,000	0%
Excess over 125,001 up to £250,000	2%
Excess over £250,001 up to £925,000	5%
Excess over £925,001 up to £1,500,000	10%
Excess over £1,500,001	12%

• All purchases of second or additional properties are subject to a surcharge of 3%.
• From 1st April 2021 all purchases of residential property by a non-resident are subject to a surcharge of 2%.
• A reduction in SDLT is applicable to first-time buyers.

Purchase of a second or additional property subject to ATED	SDLT rate
The rate applies to the whole of the consideration where the purchaser is not an individual and the consideration exceeds £500,000	15%

• For residential properties to which ATED applies the rate of SDLT is 15% on the whole value.
• Company purchases of residential properties for more than £500,000 are subject to SDLT at 15%. However, if the company is to use the property in a rental business, the reduced rates apply.

The following table applies to:

• Non-residential freehold property
• Six or more residential properties bought in a single transaction
• Leasehold property (applies to lease premiums or transfer value)

Purchase price or value of rent	SDLT rate
Up to £150,000	0%
The next £100,000 (the portion from £150,001 to £250,000)	2%
The remaining amount (the portion above £250,000)	5%

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Inheritance Tax (IHT)

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who has died.

Inheritance Tax (IHT)	2020-21	2021-22
£NIL band rate	£325,000	£325,000
Residence £NIL band rate	£150,000	£175,000
Lifetime transfers in excess of £325,000	20%	20%
Rate of tax on the excess over the £NIL band rate	40%	40%

• Chargeable transfers are aggregated. Lifetime transfers in excess of £325,000 are taxed at 20%. On death the rate on the excess of an estate over £325,000 is 40%. A tapered rate is applied to transfers made between three and seven years before death.
• The first £325,000 is called the £NIL band rate.
• Between husband and wife, the surviving spouse may use any part of the £NIL Rate Band that was not used on the first death. Transfers between husband and wife who are both UK domiciled or both non-UK domiciled are exempt.
• The £NIL band rate is increased to accommodate the transfer of the family home to a descendant, with restrictions on estates worth over £2,000,000. The increase is being introduced gradually and by 2020-21 it will be £175,000 per person.
• Small gifts made out of income are exempt.
• Inheritance Tax applies to certain trusts and is payable at a (very) reduced rate every tenth year and on exit. Contact us for details.

For help with this or any other taxation matter, get in touch

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