INCOME TAX

%

2021/22  income tax rates

0

0–37,700

20

37,701–150,000

40

Over 150,000

45

2020/21

Savings: 0–5,000

0

0–37,500

20

37,501–150,000

40

Over 150,000

45

2019/20

Savings: 0–5,000

0

0–37,500

20

37,501–150,000

40

Over 150,000

45

2021/22

£

2020/21

£

2019/20

£

Personal allowance

Basic allowance

12,570

12,500

 12,500

Income limit for personal allowance

100,000

100,000

 100,000

Married allowances

Marriage (born on/after 6 April1935)

1,260

1,250

1,250

Minimum (born before 6 April 1935)

3,530

3,510

3,450

Maximum (born before 6 April 1935)

9,125

9,075

8,915

Income limit for married couples’ allowance, born before 6 April1935

30,400

30,200

29,600

Blind person’s allowance

2,520

2,500

2,450

Rent-a-room relief

7,500

7,500

7,500

Trading income allowance

1,000

1,000

1,000

Property income allowance

1,000

1,000

1,000

Savings allowance - basic rate

1,000

1,000

1,000

Savings allowance - higher rate

   500

   500

   500

Guide from

Spiro Neil & Neils Limited

Chartered  Accountants

Budget 2021: tax rates and allowances

2021/22

2020/21

£

£

Income tax rates: England, Wales & Northern Ireland
(non-dividend income) (note 1)

0% starting rate for savings only

Up to 5,000

Up to 5,000

20% basic rate tax

12,571 - 50,270

12,501 - 50,000

40% higher rate tax

50,271 - 150,000

50,001 - 150,000

45% additional rate tax

Above 150,000

Above 150,000

Note 1: Welsh income tax rates and thresholds are subject to parliamentary approval, however the Welsh Government has made a commitment not to raise Welsh Rates of Income Tax. Therefore, Welsh taxpayers will continue to pay the same rates as their English and Northern Irish counterparts.

The Income tax bands will remain frozen until tax year 2025-26.

Scottish rates of income tax (non-dividend income) (note 2)                                                  

19% starting rate

12,571 - 14,667

12,501 - 14,585

20% basic rate tax

14,668 - 25,296

14,586 - 25,158

21% intermediate rate tax

25,297 - 43,662

25,159 - 43,430

41% higher rate tax

43,663 - 150,000

43,431 - 150,000

46% top rate

Above 150,000

Above 150,000

Note 2: Scottish taxpayers pay the same tax as the rest of the UK on dividends and savings interest. Scottish income tax rates and thresholds are subject to parliamentary approval.

2021/22

2020/21

Income tax rates (dividend income)

Dividend allowance

£2,000

£2,000

Dividend ordinary rate (for dividends within basic rate band)

7.50%

7.50%

Dividend upper rate (for dividends within higher rate band)

32.50%

32.50%

Dividend additional rate (for dividends above higher rate band)

38.10%

38.10%

Child benefit / guardian's allowance rates (notes 3 & 4)

Higher rate (eldest or only child) (per week)

£21.15

 £21.05

Other children

£14.00

 £13.95

Guardian’s allowance per week

£18.00

 £17.90

Note 3: An income tax charge will apply to taxpayers with ‘adjusted net income’ exceeding £50,000 in a tax year, when child benefit is also received by them or their partner. The charge will reduce the financial benefit of receiving child benefit for those with income between £50,000 and £60,000 and remove it completely for taxpayers with income above £60,000.

Note 4: From January 2021, no child benefit payments are made in respect of children living overseas. This will apply to EEA migrants arriving in the UK under the new immigration system.

Personal allowances

 £

£ 

Personal allowance (note 5)

12,570

12,500

Dividend allowance

2,000

2,000

Maximum married couple’s allowance for those born before 6 April 1935 (note 6)

9,125

9,075

Married couple’s allowance – minimum amount

3,530

3,510

Micro entrepreneur’s allowance: individuals making property or trading incomes below the level of the allowance will no longer need to declare or pay tax, while those whose income exceeds the allowance have the choice of simply deducting the allowance instead of calculating their exact expenses or calculating their profits in the normal manner

Allowance:
1,000
each

 Allowance: 1,000
each

Income limit for personal allowance (note 7)

100,000

 100,000

Income limit for married couple’s allowance: born before 6 April 1935 

30,400

 30,200

Blind person’s allowance

2,520

 2,500

Rent-a-room relief

7,500

 7,500

Transferable / shareable tax allowance for married couples and civil partners (note 8)

1,260

1,250

2021/22

2020/21

£

£

Personal savings allowance for basic rate taxpayers

1,000

 1,000

Personal savings allowance for higher rate taxpayers

500

 500

Personal savings allowance for additional rate taxpayers

0

0

Note 5: From 2016/17 onwards, all individuals are entitled to the same personal allowance, regardless of the individual’s date of birth. This allowance is subject to the £100,000 income limit which applies regardless of the individual’s date of birth.

Note 6: This allowance is reduced by £1 for every £2 of income in excess of the income limit, but married couple’s allowance will not reduce below £3,530.

Note 7: Personal allowances are subject to the £100,000 income limit, which applies regardless of the individual’s date of birth. The individual’s personal allowance is reduced where their income is above this limit. The allowance is reduced by £1 for every £2 above the limit, down to zero.

Note 8: This allowance is available to married couples and civil partners who are not in receipt of married couple’s allowance. A spouse or civil partner who is not liable to income tax, or not liable at the higher or additional rates, can transfer this amount of their unused personal allowance to their spouse or civil partner. The recipient must not be liable to income tax at the higher or additional rates.

If the couple marry or register a civil partnership, they will get the allowance on a pro-rata basis for the rest of that tax year. If one of them dies or there is a divorce or separation, the allowance continues until the end of the tax year.

National insurance

Lower earnings limit, primary class 1 (per week)

£120

 £120

Upper earnings limit, primary class 1 (per week)

£967

 £962

Apprentice upper secondary threshold (AUST) for under 21s / 25s

£967

 £962

Primary threshold (per week)

£184

£183

Secondary threshold (per week)

£170

 £169

Employment allowance (per year / employer) (note 9)

£4,000

£4,000

Employee’s primary class 1 rate between primary threshold and upper earnings limit

12%

 12%

Employee’s primary class 1 rate above upper earnings limit

2%

 2%

Married woman’s reduced rate between primary threshold and upper earnings limit

5.85%

 5.85%

Married woman’s rate above upper earnings limit

2%

 2%

Employer's secondary class 1 rate above secondary threshold

13.80%

 13.80%

2021/22

2020/21

Class 2 rate (per week where profits are above small profits threshold)

£3.05

£3.05

Class 2 small profits threshold (per year)

£6,515

£6,475

Special class 2 rate for share fishermen (per week)

£3.70

 £3.70

Special class 2 rate for volunteer development workers

£6.00

 £6.00

Class 3 voluntary rate (per week)

£15.40

 £15.30

Class 4 lower profits limit

£9,568

 £9,500

Class 4 upper profits limit

£50,270

 £50,000

Class 4 rate between lower profits limit and upper profits limit

9.00%

 9.00%

Class 4 rate above upper profits limit

2.00%

 2.00%

Note 9: From April 2020, this will be limited to employers with an employer NIC bill below £100,000 in the previous tax year.

Any deemed payments made to off-payroll workers do not count towards the £100,000 employers (secondary) class 1 NICs total. You cannot claim employment allowance for these workers.

Employment allowance cannot be claimed for off-payroll workers.

Pensions

 £

 £

Annual allowance (note 10)

40,000

40,000

Lifetime allowance (note 11)

1,073,100

 1,073,100

Money purchase annual allowance (note 12)

4,000

 4,000

Note 10: The annual allowance is a limit to the total amount of contributions that can be paid to a defined contribution pension scheme and the total amount of benefits that you can build up in a defined benefit pension scheme each year, for tax relief purposes.

Since 6 April 2016, individuals with a high income have had a tapered annual allowance, where for every £2 of adjusted income over a threshold, an individual’s annual allowance is reduced by £1. From 6 April 2020, the Tapered Annual Allowance applies for individuals with 'threshold income' of over £200,000, and 'adjusted income' of over £240,000. The annual allowance will be £4,000 for individuals with total adjusted income (including pension accrual) over £312,000.

From April 2021, the annual allowance for individuals with total income (including pension accrual) of over £312,000 will be £4,000.

Note 11: The lifetime allowance will remain same at the current level of £1,073,100 until April 2026.

Note 12: The annual allowance is currently capped at £40,000, although a lower limit of £4,000 may apply if you have already started drawing a pension.

2021/22

2020/21

Reliefs and incentives

Enterprise Investment Scheme (EIS) – maximum (note 13)

£1,000,000

£1,000,000

Venture Capital Trust (VCT) – maximum

£200,000

£200,000

Enterprise Management Incentive Scheme (EMI) – employee limit up to the value of £250,000 in a three-year period

£250,000

£250,000

Seed Enterprise Investment Scheme (SEIS) – maximum (note 14)

£100,000

£100,000

Social Investment Tax Relief (SITR) – maximum

£1,000,000

£1,000,000

Income tax relief on EIS schemes

30%

30%

Income tax relief on VCT schemes

30%

30%

Income tax relief on SEIS schemes

50%

50%

Income tax relief on SITR schemes

30%

30%

Note 13: From 6 April 2018, the annual limit is doubled to £2m, provided that any amount over £1m is invested in one or more knowledge-intensive companies.

Note 14: Capital gains tax reinvestment relief may also be available for investments made in 2018/19 on 50% of the amount invested.

Individual Savings Account (ISA):

 £

 £

ISA (NISA) annual limit

20,000

20,000

Junior ISA investment annual limit – under 18, living in the UK

9,000

9,000

Child Trust Fund annual limit

9,000

9,000

Lifetime ISA annual limit (note 15)

4,000

4,000

Note 15: To open a Lifetime ISA you must be 18 or over but under 40. Contributions can be made until age 50. The government will add a 25% bonus to the savings, up to a maximum of £1,000 per year. The lifetime ISA limit of £4,000 counts towards the annual ISA limit.

Capital gains tax

2021/22

2020/21

Rate

Basic rate tax payer

 10%

 10%

Higher rate tax payer

 20%

 20%

Gain on sale of residential property

Basic rate tax payer

18%

18%

Higher rate tax payer

28%

28%

2021/22

2020/21

Annual exemption – individuals / trusts for disabled persons (note 16)

£12,300

£12,300

Annual exemption – other trusts

£6,150

£6,150

Business Assets Disposal Relief lifetime limit (note 17)

£1,000,000

£1,000,000

Investors’ Relief lifetime limit

£10,000,000

£10,000,000

Entrepreneurs’/Investors’ rate

10%

10%

Chattels exemption

£6,000

£6,000

Note 16: Annual exemption of £12,300 is frozen until tax year 2025-26.

Note 17: Business Assets Disposal Relief (formerly Entrepreneurs’ Relief) lifetime limit reduced from £10m to £1m for disposals made on or after 11 March 2020.

Inheritance tax

2021/22

2020/21

Single person’s nil-rate band

£1 - £325,000

£1 - £325,000

Single person’s 40% band

over £325,000

over £325,000

Residence nil-rate band (RNRB) – maximum (note 18)

£175,000

£175,000

Reduced rate (note 19)

36%

36%

IHT rate (for chargeable lifetime transfers)

20%

20%

Married couples or civil partnerships allowance nil-rate band

£650,000

£650,000

Gifts to charities

Exempt

Exempt

Small gifts to same person

£250

£250

General gifts – annual exemption

£3,000

£3,000

Wedding gifts to children

£5,000

£5,000

Wedding gifts to grandchildren

£2,500

£2,500

Wedding gifts to any other person

£1,000

£1,000

Note 18: The RNRB is available in respect of a main residence given away to children (including adopted, foster or stepchildren). Any unused nil-rate band transfers to the deceased’s spouse or civil partner, even where death predates the availability of the additional threshold. It applies in addition to the existing nil-rate band (NRB) or threshold (currently £325,000) if the individual and estate meet the qualifying conditions.

Note 19: The estate can pay inheritance tax at a reduced rate of 36% on some assets if you leave 10% or more of the net value to charity in your will.

Business Property Relief

2021/22

2020/21

Business or interest in a business and transfers of unquoted shareholdings

 100%

 100%

 Taxation of trusts

2021/22

2020/21

Accumulation or discretionary trusts:

Trust income up to £1,000 – dividend type income (note 20)

7.50%

7.50%

Trust income up to £1,000 – all other income

20%

20%

Trust income over £1,000 – dividend type income (note 20)

38.10%

38.10%

Trust income over £1,000 – all other income

45%

45%

Interest in possession trusts:

Dividend type income

7.50%

7.50%

All other income

20%

20%

Note 20: Trustees do not qualify for the dividend allowance. This means trustees pay tax on all dividends depending on the tax band they fall within.

Corporation tax

All profits and gains (excluding determination agreements and diverted profits) (note 21)

19%

19%

S.455 tax on loans made by close companies to participators

32.50%

32.50%

Note 21: Corporation tax rate will remain at 19% until March 2023. From April 2023, the main rate will increase to 25% for business profits made by the company over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.

Capital allowances

Main writing-down allowance (reducing balance)

18%

18%

Special rate writing-down allowance (reducing balance)

6%

6%

Structures and buildings allowance (SBA)

3%

3%

Motor cars if CO2 > 50g/km but does not exceed 110g/km)

6%

18%

Motor cars if CO2 > 110g/km

6%

6%

FYA – New and unused motor cars if CO2 emissions are 50 g/km or less (or car is electric) (note 22)

100%

100%

Small pool write-off where WDV is £1,000 or less

100%

100%

First-year allowances for electric charge points (note 23)

100%

100%

Annual investment allowance (AIA) (note 24)

£1,000,000

£1,000,000

Annual investment allowance rate

100%

100%

Note 22: From April 2021, the thresholds for FYA will be reduced from 50g/km to 0g/km. Main rate of 18% capital allowance will be applicable for business cars with CO2 emissions not exceeding 50g/km. Business cars with CO2 emissions exceeding 50g/km will be eligible for writing-down allowance at the special rate of 6%.

Note 23: The allowance will be available until 31 March 2023 for incorporated businesses and 5 April 2023 for unincorporated businesses.

Note 24: From 1 January 2019 the annual investment allowance is increased from £200,000 to £1m for investment made from 1 January 2019. This is temporarily extended until 31 December 2021. The threshold will revert back to £200,000 from 1 January 2022.

Research and development tax credit rates

2021/22

2020/21

SME rate

230%

 230%

Research and development SME payable credit (note 25)

14.5%

14.5%

Research and development expenditure credit (RDEC) scheme

13%

 13%

Film / High-end TV / videogames tax credit

25%

25%

Open-ended investment companies and authorised unit trusts

20%

20%

Note 25: For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability.

Patent box

Patent box

10%

10%

VAT

Standard rate (note 26)

20%

20%

Reduced rate

5%

5%

Zero rate

0%

0%

Flat rate of VAT on gross turnover (for limited cost trader)

16.5%

16.5%

Normal scheme registration threshold

£85,000

£85,000

Deregistration threshold

£83,000

£83,000

Cash and Annual accounting scheme – maximum to join

£1,350,000

£1,350,000

Cash and Annual accounting scheme – exit threshold

£1,600,000

£1,600,000

Flat-rate scheme – maximum allowed to join

£150,000

£150,000

Flat-rate scheme exit threshold

£230,000

£230,000

Note 26: Due to the Coronavirus pandemic, the hospitality, holiday accommodation and attractions industry can apply a reduced rate of 5% for certain supplies made between 15 July 2020 and 30 September 2021. Further the rates for these sectors will be 12.5% until 31 March 2022 before they are back to normal standard rate of VAT 20%.

2021/22

2020/21

Annual tax on enveloped dwellings (ATED)

£ 

£ 

More than £0.5m but not more than £1m

3,700

3,700

More than £1m but not more than £2m

7,500

7,500

More than £2m but not more than £5m

25,300

25,200

More than £5m but not more than £10m

59,100

58,850

More than £10m but not more than £20m

118,600

118,050

More than £20m

237,400

236,250

March 2021

ACCA LEGAL NOTICE

This is a basic guide prepared by ACCA UK's Technical Advisory Service for members and their clients. It should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.