Rates and allowances

The measure

Income tax

The Chancellor has confirmed that the income tax personal allowance and rate bands for 2020/21 will continue at the same level as in 2019/20. The personal allowance remains at £12,500 and the basic rate band remains at £37,500 (for England, Wales and Northern Ireland), giving a higher rate threshold of £50,000 for 2020/21. The basic, higher and additional rates of tax will remain at 20%, 40% and 45% respectively. Different rates and thresholds apply to Scottish taxpayers.

National insurance contributions

The Budget confirms the government’s commitment to increase the national insurance contributions (NICs) primary threshold and lower profits limit, for employees and the self-employed respectively, to £9,500 from April 2020. This is the first step in meeting the government’s ambition to increase these thresholds to £12,500, which would save a typical employee over £450 per year. The upper earnings limit (above which the NIC rate is 2%) remains at £50,000 in line with the higher rate threshold.

Capital gains tax

The annual exemption will increase to £12,300 (from £12,000) from 6 April 2020. 

Who will be affected?

This increase in the national insurance threshold will benefit around 31 million people, with a typical employee saving around £104 and a typical self-employed person around £78 in 2020/21. Around 1.1 million people will be taken out of paying Class 1 and Class 4 NICs entirely. 

When will the measure come into effect?

The measures will take effect from 6 April 2020.