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.
