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Legislation changes in the 2020/2021 tax year

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Summary

On Wednesday 11 March, the first of two Budgets during 2020 was announced. This Budget was scheduled for November last year, but was delayed due to the general election. There will also be an autumn budget, as normal.

Description

NOTE: To find legislation for the current 2021/2021 tax year, you can visit our help guide.  Read more

To ensure you're using the correct legislation for the 2020/21 tax year, you need to ensure you're using v26.01 or above. 

If necessary, you can also view the legislation for the 2019/2020 tax year.

Resolution

To help you, we've highlighted the changes to payroll legislation. You can also find details in HMRC's Employer Bulletin: Budget edition.

Personal allowance

The personal allowance for income tax remains at £12,500 for the 2020/2021 tax year.

Tax bands and rates
England and Northern Ireland

The bands remain the same from 6 April 2020.

Bandwidth
From
To
Rate (%)
Basic Rate Band
37,500.00
0.01
37,500.00
20.00
Yes
112,500.00
37,500.01
150,000.00
40.00
No
excess
150,000.01
excess
45.00
No

For example, the table below shows the UK Income Tax rates an employee pays in each band, if the employee has a standard Personal Allowance of £12,500.

Band Taxable income UK tax rate (%)
Personal allowance Up to £12,500 0%
Basic rate £12,501 to £50,000 20%
Higher rate £50,001 to £150,000 40%
Additional rate over £150,000 45%
Wales

A Welsh taxpayer's tax code is the same as a England and Northern Ireland tax code, but is prefixed with an C. For example, C1250L.

Bandwidth
From
To
Rate (%)
Basic Rate Band
37,500.00
0.01
37,500.00
20.00
Yes
112,500.00
37,500.01
150,000.00
40.00
No
excess
150,000.01
excess
45.00
No
Scotland

A Scottish taxpayer's tax code is the same as a England and Northern Ireland tax code, but is prefixed with an S. For example, S1250L.

The table below shows the Scottish Income Tax rates an employee pays in each band, if the employee has a standard Personal Allowance of £12,500.

Threshold From 06/04/2020 From date to be confirmed
Starter rate - 19% 1 - 2,049 1 - 2,085
Basic rate - 20% 2,050 - 12,444 2,086 - 12,658
Intermediate rate - 21% 12,445 - 30,930 12,659 - 30,930
Higher rate - 41% 30,931 - 150,000 30,931 - 150,000
Top rate - 46% Over 150,000 Over 150,000
NI bands and rates

The new earnings thresholds for category A (Standard Rate Contributions) are effective from 6 April 2020.

Earnings Limit
Weekly
Monthly
Yearly
Lower Earnings Limit (LEL)
120.00
520.00
6,240.00
Primary Threshold (PT)
183.00
792.00
9,500.00
Secondary Threshold (ST)
169.00
732.00
8,788.00
Upper Earnings Limit (UEL)
962.00
4,167.00
50,000.00
Upper Secondary Threshold (UST)
962.00
4,167.00
50,000.00
Apprentice Upper Secondary Threshold (AUST)
962.00
4,167.00
50,000.00

You can find information for other NI categories, from our support guide. Read more >

Statutory payments

From 6 April 2020 the statutory sick pay (SSP) rate is £95.85 per week.

The 2020/2021 rates for statutory maternity pay (SMP), statutory paternity pay (SPP), statutory paternity pay adoption (SPP(A)), shared parental pay (ShPP) and statutory adoption pay (SAP):

Payment
Minimum weekly earnings £
Higher rate %
The standard rate is the lesser of
£
%
SMP
120.00
90.00
151.20
90.00
SPP, SPP(A) and ShPP
120.00
N/A
151.20
90.00
SAP
120.00
90.00
151.20
90.00
Employment allowance

The employment allowance increases to £4,000 for the 2020/2021 tax year. From 6 April 2020 you will only be able to claim if your Class 1 National Insurance bill was below £100,000 in the previous tax year.

Student loans

When you set up a student loan deduction for an employee, you must specify whether they're on Plan 1 or Plan 2.

Type
Weekly £
Monthly £
Annual £
Rate %
Plan Type 1
372.88
1,615.83
19,390.00
9.00
Plan Type 2
511.05
2,214.58
26,575.00
9.00
Postgraduate loans
Type
Weekly £
Monthly £
Annual £
Rate %
Standard
403.84
1,750.00
21,000.00
6.00
National minimum/living wage

The rates changes from 1 April 2020.

Workers aged Rates from April 2019 Rates from April 2020
25 years and over £8.21 £8.72
21 to 24 years £7.70 £8.20
18 to 20 years £6.15 £6.45
16 - 17 years £4.35 £4.55
Apprentice £3.90 £4.15

To ensure you're using the correct legislation, you must install your payroll year end software updates before 1 April.

For full details about the legislation, please visit the GOV.UK website.