Tax Guide 2021-22
Taxation measures to note
- Personal Allowance increased to £12,570 and the Income Tax higher rate threshold increased to £50,270 from 6 April 2021, both thresholds will remain at these levels until April 2026
- IHT nil-rate band remains at £325,000 and the residence nil-rate band at £175,000, until April 2026
- CGT annual exemption remains at £12,300 for individuals and £6,150 for most trusts
- Lifetime Allowance for pensions remains at £1,073,100 until April 2026, the Annual Allowance remains at £40,000
- New single-tier State Pension increased to £179.60 per week in April 2021, the older basic State Pension increased to £137.60 per week
- ISA allowance remains at £20,000 for the 2021-22 tax year / JISA allowance and CTF annual subscription limit remain at £9,000 for the 2021–22 tax year.
Capital Gains Tax (CGT)
- The annual CGT exemption for 2021–22 is £12,300
- For individuals the flat rate of CGT that applies to gains in excess of the annual exemption is 10% up to the higher rate tax threshold
- Chargeable gains in excess of the higher rate threshold: 20%
- £6,150 CGT exemption for trusts, 20% rate applies thereafter
- Additional 8% for residential property (where applicable)
- Lifetime Allowance on gains eligible for Entrepreneurs’ Relief is £1m (reduced from £10m March 2020)
- 30 days to pay CGT in respect of residential property (buy-to-let) disposals.
Tax on residential property purchase
Stamp Duty Land Tax (SDLT) in England and Northern Ireland; Land and Buildings Transaction Tax (LBTT) in Scotland; Land Transaction Tax (LTT) in Wales Until 30 June 2021– SDLT 0% band will be £500,000. For those purchasing properties over this value, the rates are as follows:
- The next £425,000 (the portion from £500,001 to £925,000) – 5%
- The next £575,000 (the portion from £925,001 to £1.5m) – 10%
- The remaining amount (the portion above £1.5m) – 12% From 1 July to 30 September 2021 – SDLT 0% band will be £250,000. For those purchasing properties over this value, the rates are as follows:
- The next £675,000 (the portion from £250,001 to £925,000) – 5%
- The next £575,000 (the portion from £925,001 to £1.5m) – 10%
- The remaining amount (the portion above £1.5m) – 12%
From 1 October 2021 the rates will revert to: £0–125,000 0%, £125,001–250,000 2%, £250,001–925,000 5%, £925,001–1,500,000 10%, £1,500,000+ 12%
Similar temporary measures have been adopted in Wales and Scotland
From April 2021, a 2% supplement on non-UK residents purchasing residential property applies.
Personal Allowances
| 2021-22 | |
| Personal Allowance | £12,570 |
| Personal Savings Allowance (basic rate taxpayer) | £1,000 |
| Personal Savings Allowance (higher rate taxpayer) | £500 |
| Rent-a-room tax-free income | £7,500 |
| Dividend Allowance | £2,000 |
- The Personal Allowance for those with adjusted net income over £100,000 reduces by £1 for every £2 of income
- Interest on savings is tax-free to a threshold of £1,000 for basic rate taxpayers and £500 for those who pay higher rate tax
- Married Couple’s Allowance is given at 10%, claimants must be born before 6 April 1935; tax relief applies to the first £9,125
- Marriage Allowance: spouses or civil partners are able to transfer £1,260 of their unused Personal Allowance to their partner; this is available provided neither partner pays tax at the higher rate and is not available if the couple are in receipt of Married Couple’s Allowance.
Income Tax rates
The following allowances and rates will apply in 2021–2022 for the UK (excluding Scotland)
| Rate of tax | 2021-22 | |
| Starting rate (savings income only) | 0% | £0-£5,000* |
| Basic rate | 20% | £0-£37,700 |
| Higher rate | 40% | £37,701-£150,000 |
| Additional rate | 45% | £150,000+ |
| Basic rate on dividends | 7.5% | Over the £2,000 dividend allowance |
| Higher rate on dividends | 32.5% | Over the £2,000 dividend allowance |
| Additional rate on dividends | 38.1% | Over the £2,000 dividend allowance |
- Income Tax is paid on the amount of taxable income remaining after allowances have been deducted
- *Not available if non-savings/non dividend income exceeds this limit.
National Insurance rates
The following Class 1 rates will apply for employees (weekly figures):
| 2021-22 rates | Limit | Employee | Employer |
| Primary threshold | £184 | 12% | 13.8% |
| Upper earnings limit | £967 | 2% | (above £170 pw) |
- Annual ‘employment allowance’ reduces Class 1 NIC liability by £4,000 for employers with an NIC bill of less than £100,000
- No employer’s contribution payable for under-21s up to Upper Secondary Threshold (£967).
Class 4 contributions for the self-employed (annual figures):
| 2021-22 rates | Limit | Rate payable to limit |
| Lower profits limit | £9,568 | Nil |
| Upper profits limit | £50,270 | 9% |
| Rate above the upper limit 2% |
Pension Allowances
- The Annual Allowance for 2021–22 is £40,000. Pension funding exceeding the allowance in a tax year can be offset against any unused Annual Allowance from the previous three tax years
- Individuals with threshold income in excess of £200,000 and adjusted income of more than £240,000 in a tax year will be subject to a tapered Annual Allowance in that tax year. £1 of Annual Allowance is lost for every £2 of adjusted income over £240,000. The minimum reduced tapered Annual Allowance is £4,000
- The standard Lifetime Allowance remains at £1,073,100 until April 2026.
Tax-free savings for individuals
- Overall ISA limit £20,000
- Junior ISA allowance £9,000
- Lifetime ISA £4,000.
Some tax relief options for individuals
Venture Capital Trusts (VCTs)
- Relief on investments in certain quoted companies up to £200,000 per annum
- Income Tax relief at 30%, provided shares held at least five years
- Capital Gains Tax exemption on disposal (only if Income Tax relief received)
- Dividends received from VCTs may be exempt from Income Tax.
Enterprise Investment Schemes (EIS)
- Relief on investments in certain unquoted trading companies up to £1m per annum (or £2m as long as at least £1m of this is invested in knowledge intensive companies)
- Income Tax relief at 30%
- Capital Gains Tax exemption on disposal
- Unlimited amounts of capital gains from the disposal of other assets may be able to be deferred by making an EIS investment.
Corporation Tax
- The Corporation Tax for company profits is currently 19%
- To increase to 25% from 1 April 2023, with small companies rate of 19% where profits do not exceed £50,000.
Inheritance Tax (IHT)
- The nil-rate IHT band is £325,000, with 40% IHT normally payable above this threshold
- A lower rate of IHT (36%) applies if you leave 10% of your net assets to charity
- Residence nil-rate band of £175,000 where a residence is passed on death to a direct descendant.
The proportion of the threshold ‘unused’ on the first death of
husband or wife (or civil partners) is effectively transferable to the
surviving partner and serves to increase his or her threshold by a
corresponding percentage.
Chargeable lifetime transfers and potentially exempt transfers
attract taper relief on tax payable on the gift, if made up to seven
years before death, on the amount of gift over the nil-rate band.
Certain gifts are IHT-free however soon death occurs, including:
- Gifts between UK domiciled husband and wife or between civil partners
- Total gifts up to £3,000 in a year (can be carried forward one year)
- Small gifts to other recipients (up to £250 per recipient in year)
- Gifts in consideration of marriage or civil partnership ranging from £5,000 from each parent of the couple, to £1,000 from anyone else.
State Pension entitlement
- A flat rate, single tier State Pension of £179.60 per week is payable from 6 April 2021 (35 qualifying years of National Insurance contributions needed for full rate), available to those reaching state pension age (SPA) on or after 6 April 2016
- For those who reached SPA before 6 April 2016, the basic State Pension of £137.60 applies (30 qualifying years needed for full rate), plus any additional state pension.
Principal state benefits
| Weekly benefits | 2021-22 |
| Statutory Sick Pay | £96.35 |
| Statutory Maternity Pay – first 6 weeks | 90% of weekly earning |
| Statutory Maternity Pay – next 33 weeks | £151.97* |
| Ordinary Statutory Paternity Pay – 2 weeks | £151.97* |
| Additional Statutory Paternity Pay – variable period | £151.97* |
*or 90% of earnings, if lower
Self Assessment dates
31 Jan 2021
Deadline for filing 2019-20 returns, balancing payment due for 2019-20, first payment due for 2020-21
31 Jul 2021
Second payment on account for 2020-21 due to HMRC
05 Aug 2021
Deadline to notify chargeability and advise HMRC of need to register for Self Assessment
31 Oct 2021
Deadline for submitting paper Self Assessment returns to HMRC
30 Dec 2021
Deadline for filing online return with HMRC if tax is to be collected through PAYE
31 Jan 2022
Deadline for filing 2020-21 returns, balancing payment due for 2020-21, first payment due for 2021-22
NOTE:
The information contained in this leaflet is based on our understanding of the Budget proposals, which are subject to change. No action should be taken without further advice being sought. We can accept no responsibility for any errors or omissions.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. Tax treatment is based on individual circumstances and may be subject to change in the future.