Few changes, but every little counts

It’s April, so another tax year started, to be prompt the 2020/2021 season, just like in football, jokes apart not much changed. A bit improvement here and there which are more than welcome, as the commercial goes; every little counts.

The personal allowance will remain the same as it was in the previous tax year to be exact £12,500, the only remarkable change for ordinary workers are the increased National Insurance contribution’s threshold increased above inflation to £9,500 quite a bit from the previous tax year’s of £8,632. According to the median incomes it means in average, it saves in taxes for full time workers around £104 annually and about £78 annually for a typical self-employed person.

The national living wage also increased for workers aged 25 and over by 6.2% to £8.72 an hour from 1st April.

Workers aged 21-24 saw their hourly rate increased from £7.70 to £8.20 which is substantial.

Workers aged 18-20 saw their hourly rate increased with 30p to £6.45 an hour.

Workers aged 18 or under saw their hourly rate increased with 20pm to £4.55.

The minimum wage for apprentices also increased from £3.90 to £4.15 an hour.

Pensions

From 6th April the pensions lifetime allowance also increased from £1,055,000 to £1,073,000. LTA is basically an overall limit of tax privileged pension funds a member can accrue during their lifetime.

The state pension seen the biggest rise since 2012 as it is increased with 3.9% in April, in simple terms it means people whom reached pension age after 6th April 2016 seen a rise of £6.60 a week to £175.20.

The old state pension also increased with £5.05 a week to £134.25.

Worth to mention also that the amount that graduates can earn before they start to repay their student loans increased from £25,725 to £26,575. That’s awesome news in the dire reality for recent graduates and for former students with lower incomes.

The maximum amount that parents can save in a junior ISA for their children is more than doubled from £4,368 to £9,000 a year. Super incentive, so parents with spare cash and higher incomes/saving rates can start to wisely invest for their kids.

Tax rates remained the same and what is important to note in FiRe circles, that dividend allowance remained the same £2000 it’s just sad that it didn’t increase.

On the positive side, capital gains tax allowance increased from £12,000 to £12,300 from April.

These were the biggest changes for the upcoming tax year, obviously I didn’t write about all the changes, but I believe I covered the most important ones, for further information, feel free to check it out on the government’s portal here.

Your sincerely

To/Minimal