Why was there tension between Catholics and Protestants in Elizabethan times?

  Catholics and Protestants had very different beliefs. A major difference in opinion was that Catholics thought that the Pope was connected to God and could grant them salvation whereas Protestants thought that the only way to find salvation was through a direct, personal connection to God. However, their difference in Beliefs was only part of the reason for tension between the two religious factions. Another big influence was politics.

  Before the famous Virgin Queen ascended the throne, her half-sister Mary (as known by the charming sobriquet 'Bloody Mary') ruled England. Mary is well known for restoring Roman Catholicism to England, imprisoning and executing -by burning at the stake- numerous Protestants under Acts of Heresy. In doing this, she instilled anti-Catholic feelings among many of her subjects.

  When Elizabeth, following Mary's death, ascended throne, she restored Protestism to England. Elizabeth tried to be pretty tolerant over religious matters in spite of this, to prevent Catholic revolt. Nonetheless, the Pope rejected her as illigitimate and a heretic, and released her subjects from obedience to her. He threatened Catholics who obeyed her rule with excommunication. He also sent missionaries to England to assist Catholics with plots to overthrow her and place her cousin, Mary, Queen of Scots (yes, another Mary, not a mistake!), on the throne.

  Quite understandably, Elizabeth was not pleased by this and sought to put an end to any such plots. She went about this by persecuting the Catholic clergy, and in the community, excluding Catholics from their professions, fining and imprisoning them if they were suspected of being part of any nefarious plots.

  As a result, there was much tension bleeding into Elizabethan society. Catholics feared and resented the persecution they faced at the hands of non-Catholics whilst Protestants, secure for now, feared Catholic plots to overthrow a monarch who favoured them and resented Catholics for their own past persecution at the hands of the Catholic Queen Mary (the half-sister, that is). Protestants were always on the lookout for offending Catholics to turn in and discriminated against them which caused Catholics to hate them and react bitterly.

You can see this in action in the Lacey Chronicles by Eve Edwards (particularly the first installment, 'The Other Countess'), a series of historical romances for Young Adults.