April 9, 2021 News No Comments

In the March budget the Chancellor announced he would be freezing all tax allowances and thresholds from 2021/22 until 2026, but there were some pre planned changes coming in anyway.

The changes are detailed below:

Income Tax

2020/21 2021/22
Personal Allowance £12,500 £12,570
Basic Rate Tax (20%) Up to £37,500 Up to £37,700
Higher Rate Tax (40%) £37,501 – £150,000 £37,701 – £150,000
Additional Rate Tax (45%) £150,001+ £150,001+

The income limit for the tapering of the Personal Allowance remains at £100,000.

Dividend tax rates will remain the same:

Basic Rate and Non Tax Payers 7.50%
Higher Rate 32.50%
Additional Rate 38.10%

 

National Insurance

Class 1 Weekly Threshold:

2020/21 2021/22
Lower Earnings Limit £120 £120
Primary Threshold (When NI is paid) £183 £184
Secondary Threshold (Employers pay NI) £169 £170
Upper Earnings Limit (Employees pay lower rate of NI) £962 £967

 

The class 1 rates will remain at:

Employers NI above Secondary Threshold 13.80%
Employee NI above Primary Threshold  12%
Employee NI above Upper Earnings Limit 2%

 

Class 2 NI:

2020/21 2021/22
Small Profits Threshold £6,475 £6,515
Rate per week £3.05 £3.05

 

Class 3 NI:

The weekly rate for voluntary Class 3 NI will increase from £15.30pw to £15.40pw.

Class 4 NI:

2020/21 2021/22
Lower Profits Limit £9,500 £9,568
Upper Profits Limit £50,000 £50,270
Rate between LPL and UPL 9% 9%
Rate above UPL 2% 2%

 

Capital Gains Tax

The annual exempt amount will remain at £12,300 for individuals.

For trusts this will remain up to a maximum of £6,150, dependent upon how many trusts a settlor has created.

Inheritance Tax

The Residence Nil Rate Band remains at up to £175,000 per person, or the value held in a main residence if lower. This only applies if a property is left to a direct descendant (children or grandchildren).

The Nil Rate Band remains at £325,000 per person.

Each of these allowances is inheritable by a surviving spouse although the Residence Nil Rate Band can be tapered away for estates valued at above £2m.

Written by James Hunt