The main personal tax announcements in the Spring Budget 2020 are as follows:
The personal allowance will remain at £12,500 per annum. This is the amount most UK taxpayers can earn before they pay any income tax.
As the personal allowance is unchanged, as a result the most popular tax code for UK employees will remain at 1250L.
Optimum Directors Salary
The optimum salary for Directors to pay themselves will increase to an annual amount of £8,788. This is to be implemented from April 2020.
Married Couples Allowance
The married couples allowance will continue into the tax year 2020/21. It allows certain couples to transfer part of their unused personal allowance saving up to £250 per year.
Back dated claims can be made for previous tax years. As a result the total tax reclaim can be as high as £1,150. The claim for the 2015/16 tax year needs to be made by 5 April 2020.
Tax Rates and Tax Bands
The basic rate of tax will remain at 20%. The basic rate tax band is £37,500. As a result income between £12,500 and £50,000 will be taxed at 20%.
The higher rate of tax is 40% and this applies to income over £50,000.
Individuals will pay tax at a rate at the additional rate of 45% on their income which exceeds £150,000.
Tax on Savings
Individuals who pay tax at basic rate (under £50,000) have a savings allowance of £1,000. As a result they won’t pay any tax on savings interest received under £1,000.
The savings allowance for higher rate taxpayers is £500.
Individuals earning over £150,000 have £nil savings allowance.
Tax on Dividends
The tax on dividends remained unchanged. The first £2,000 of dividends is charged at a tax rate of 0%.
Basic rate taxpayers pay a dividend tax of 7.5%
Higher rate taxpayers pay a dividend tax of 32.5%
Additional rate taxpayers pay a dividend tax of 38.1%
Other budget announcements:
DISCLAIMER – Please note that the content contained in this article is for general information only and is not a substitute for professional advice – read our full disclaimer