The new tax year 2021/22 has just started and in this blog post we will take a quick dive and review upcoming changes to personal, corporation and national insurance tax.
Personal tax
As the table below shows the percentages have not change since last tax year. The Personal Allowance has increased slightly this year, which means that the first £12,570 of income is tax free.
Please note that the changes in Scottish tax has not been taken into account in this post.
If you have additional income as your salary, the amount above £12,570 would be taxed at basic rate at 20% up to £50,270, then higher tax rate at 40% up to £150,000 of earnings, and the additional rate of tax at 45% on the earning above £150,000.
The income limit for personal allowance stays without a change. As before the personal allowance will start reducing, on earnings above £100,000, £1 for each £2 of earnings and at £125,140 and above is reduced to £0.
Dividend allowance stays at £2,000, which means that the first £2,000 dividends are taxed at 0%.
National Insurance bands
The rates will stay the same as in previous tax year, just the changes in thresholds and this year the threshold has been increased to £9,568, which means up to this amount there is no employee's National Insurance contributions to pay.
The Employment Allowance stays the same as last year £4,000 with the same additional restriction as last year, which means that it is not available for the businesses where only single person on the payroll is also a director, i.e. ‘single director employee’ limited companies and it will only apply to employers if their total secondary Class 1 liability in the previous tax year was under £100,000.
National Insurance for Self-employed
Class 2 NI rate won't changed from previous year, with slightly increased lower profits limit.
Class 4 NI rates remain at 9% and 2% and is still payable in addition to class 2.
Capital gains tax
The capital gains tax exemption threshold has been increased to £12,300 with no changes to the percentages payable.
Pension contributions
Annual allowance for pension contribution stays at £40,000 per annum and lifetime allowance increase to £1,055,000.
Corporation tax
The 2021/22 brings no change to corporation tax level which remains at 19%. From April 2023 the changes to the rates will be introduced:
- companies with profits of £50,000 or less will continue to pay corporation tax at 19%
- the rate will increase in bands, with businesses whose profits are greater than £250,000 paying maximum of 25% corporation tax.
VAT
The registration threshold stays at the same level of £85,000 and de-registration is £83,000 and the Chancellor mentioned that the both thresholds would be maintained until 31st March 2024.
The temporarily reduced rate of VAT of 5% for the hospitality and tourism industry will continue to 30th September 2021 and increase to 12.5% from 1st October 2021 to 31st March 2022.
IR35
The IR35 changes to private sector will be introduced on 6th April 2021.
ISA
The ISA annual limit stays at the same level of £20,000, as well as Junior ISA of £9,000 annually.
Research and Development
Annual tax on enveloped dwellings (ATED)
Please find slightly increased rates for ATED below:
The rates should be used as guidance only as it may change in individual circumstances.