Tapered annual allowance for pensions 

The two tapered annual allowance thresholds for pensions will each be raised by £90,000 from 2020/21. The ‘threshold income’ figure will therefore be £200,000 and the ‘adjusted income’ figure will be £240,000. This will help many people, such as medical consultants, who have faced large tax bills on extra pay. While the rate of taper is unchanged, the minimum annual allowance for the highest earners from April 2020 will be reduced from £10,000 to £4,000 ­ at an ‘adjusted income’ of £312,000 or more.

Lifetime allowance for pensions 

The lifetime allowance for pension savings will increase to £1,073,100 for 2020/21, in line with inflation.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2020/21 will remain at £20,000. However, the annual subscription limit for junior ISAs (JISAs) and child trust funds (CTFs) will more than double, from £4,368 to £9,000.

Top slicing relief on life insurance policy gains

In response to the Silver First-Tier Tribunalcase, legislation will specify how allowances and reliefs must be set against life insurance policy gains. This measure will apply to all relevant gains occurring on or after 11 March 2020.

Review of the UK funds regime

A review of the UK funds regime will be undertaken during 2020, covering direct and indirect tax, as well as relevant areas of regulation. A consultation paper will examine whether there are “targeted and merited” tax changes that could help to make the UK a more attractive location for companies used by funds to hold assets. The review will also consider the VAT treatment of fund management fees and other aspects of the UK funds regime. 

Call for evidence on pension tax administration

Depending on how their pension scheme administers tax relief, people earning around or below the level of the personal allowance may or may not benefit from a top-up on their pension savings equivalent to the basic rate of tax.

A review of the options for addressing the differences will begin shortly with a call for evidence on pensions tax relief administration.

Venture capital trusts (VCTs) and enterprise investment schemes (EISs)

The venture capital limits and reliefs remain unchanged, as detailed below.

Venture capital allowances and reliefs

2020/21

2019/20

Venture capital trust at 30% 

£200,000

£200,000

Enterprise investment scheme at 30%1
EIS eligible for CGT deferral relief 

£2,000,000
No limit

£2,000,000
No limit

Seed EIS (SEIS) at 50%
  – SEIS capital gains tax reinvestment relief

£100,000
50%

£100,000
50%

* Above £1,000,000 investment must be in knowledge-intensive companies

Think ahead
The pension lifetime allowance will rise by £18,100 from 6 April 2020.
If you plan to draw from your pensions and already have funds exceeding the current £1,055,000 lifetime allowance limit, you may want to wait before taking your pension benefits.

Think ahead
The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2019/20 and 2020/21 – use it or lose it.

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