2021 Budget

This is the first in our series of seven blogs regarding the 2021 Budget delivered by the Chancellor, Rishi Sunak on 3 March 2021 and covers the changes to Income Tax and National Insurance.

Personal Allowance

The Personal Allowance applies across the UK.

• It will rise in line with the Consumer Price index to £12,570 from April 2021

• It will remain at this level until April 2026

Note that the personal allowance is reduced by £1 for every £2 where a taxpayer’s adjusted net income is above £100,000. This means the allowance will be zero if your adjusted net income is £125,140 or above.

Higher rate threshold (HRT)

• The HRT will rise to £50,270 from April 2021

• It will remain at this level until April 2026.

The HRT for savings and dividend income will apply UK-wide.

The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.

The Scottish HRT for 2021/2022 was announced in the Scottish Budget:-

https://jsca.co.uk/scottish-budget-2021-2022/ 

Starting rate for savings tax band

The band of savings income that is subject to the 0% starting tax rate will remain at the current level of £5,000 for 2021-22.

National Insurance contributions (NICs) thresholds

 NICs thresholds apply across the UK.

 As previously announced the 2021/2022 NICs thresholds will rise with the Consumer Price index.

• The NICs Primary Threshold/Lower Profits Limit will be £9,568

• The Upper Earnings Limit (UEL)/Upper Profits Limit (UPL)will rise to £50,270, in line with the income tax HRT

• The UEL/UPL will then remain aligned with the HRT at £50,270 until April 2026

Income Tax Rates

There are no changes to the UK tax and NICs rates.

However, the impact of freezing the personal allowance and HRT will be to increase tax and NIC paid as taxpayers’ incomes increase over time.

The Scottish rates of income that apply to earned income (self-employment/employment) pensions and income from property were announced in the Scottish Budget:-

https://jsca.co.uk/scottish-budget-2021-2022/

Links to other 6 Budget Blogs

https://jsca.co.uk/budget-2021-2/

Capital Gains, Inheritance Tax, Pensions, ISAs, 95% Mortgage Guarantee and Wealth Tax

https://jsca.co.uk/budget-2021-3/

Corporation Tax, Super-deduction and Special Rate Allowance, Extended Loss Carry Back for Businesses, New Recovery Loan Scheme, Preventing abuse of Research and Development (R&D) and Reform of Self-Assessment Penalties and Interest

https://jsca.co.uk/budget-2021-4/

VAT and Duties

https://jsca.co.uk/budget-2021-5/

SDLT and LBTT, Licensing in Scotland, Freeports, Levelling Up Fund Prospectus Launch, Green Initiatives, Investment in HMRC and Funding for Scotland

https://jsca.co.uk/budget-2021-6/

Self Employed Income Support Scheme (SEISS)

https://jsca.co.uk/budget-2021-7/

Coronavirus Job Retention Scheme (CJRS)

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.

Photo by Michael Longmire on Unsplash