New Tax Year 6th April 2021

The new tax year runs from 6th April 2021 to 5th April 2022.

Here are some of the changes affecting businesses and individuals, the information is taken from gov.uk with links to various pages on the gov.uk website:

Personal Tax Allowance

The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on.

Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. It’s smaller if your income is over £100,000.

 

Income Tax rates & bands

Here are the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

Income tax bands are different if you live in Scotland.

  • Personal Allowance: Up to £12,570 – Tax rate = 0%
  • Basic rate: £12,571 to £50,270 – Tax rate = 20%
  • Higher rate: £50,271 to £150,000 – Tax rate = 40%
  • Additional rate: over £150,000 – Tax rate = 45%

 

You do not get a Personal Allowance on taxable income over £125,140.

 

National Minimum Wage and National Living Wage rates

The hourly rate for the minimum wage depends on your age and whether you’re an apprentice.

You must be at least:

  • school leaving age to get the National Minimum Wage
  • aged 23 to get the National Living Wage – the minimum wage will still apply for workers aged 22 and under

These rates are for the National Living Wage (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age). The rates change on 1 April every year.

  • 23 and over: £8.91
  • 21 to 22: £8.36
  • 18 to 20: £6.56
  • Under 18: £4.62
  • Apprentice: £4.30

Apprentices are entitled to the apprentice rate if they’re either:

  • aged under 19
  • aged 19 or over and in the first year of their apprenticeship

 

Dividend Allowance

The amount of tax free dividend allowance is the same as 2020/21 at £2000.

How much tax you pay on dividends above the dividend allowance depends on your Income Tax band.

  • Basic rate: 7.5%
  • Higher rate: 32.5%
  • Additional rate: 38.1%

To work out your tax band, add your total dividend income to your other income. You may pay tax at more than one rate.

 

Corporation Tax Rates

Corporation tax on company profits is the same as 2020/21 at 19%. In the 2021 Budget, it was announced that from April 2023 the corporation tax will increase to 25%. Businesses with profits of £50,000 or less will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.

 

Super-deduction

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

For more information on super-deduction, see the factsheet from gov.uk here.

 

Employment Allowance

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000.

You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £4,000 has gone or the tax year ends (whichever is sooner).

You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £4,000 each tax year. You can still claim the allowance if your liability was less than £4,000 a year.

You can visit the Gov.uk website for more guidance or feel free to contact us if you have any questions.

 

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