UK Budget 2020 – personal tax measures

Mar 16, 2020



It was expected that some changes would be made to the pensions annual allowance limit. This is the maximum amount of tax-relieved pension savings that can be made in a year. Currently, for additional rate taxpayers, the annual allowance tapers down from £40,000 to a minimum of £10,000 by £1 for every £2 of income in excess of £150,000.


The Budget announced that the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the “threshold income” will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000.


The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020 onwards. This reduction will only affect individuals with total income (including pension accrual) over £300,000. Proposals to offer greater pay in lieu of pensions for senior clinicians in the NHS pension scheme will not be taken forward.


The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will increase in line with inflation to £1,073,100 from 6 April 2020.


The Chancellor also confirmed the Government’s commitment to increase the thresholds at which employees and the self-employed start paying NIC from £8,632 to £9,500 from April 2020. This is the first step in meeting the Government’s ambition to increase these thresholds to £12,500 as set out in the Conservative Party manifesto.


In addition, the maximum flat rate income tax deduction available to employees to cover additional household expenses will increase from £4 per week to £6 per week where they work at home under homeworking arrangements. This will take effect from April 2020.


At the time of writing, it is also confirmed that the extension of the off-payroll working rules in the public sector to the private sector will proceed as planned from 6 April 2020.


And finally, the band of savings income that is subject to the 0 per cent starting tax rate will remain at its current level of £5,000 for 2020-21.