In the November Spending Review, Chancellor Rishi Sunak announced that some income tax and National Insurance rates and allowances would increase by 0.5%. This figure was in line with the Consumer Price Index annual increase to September 2020. However, since then, the Financial Secretary to the Treasury has confirmed that NI rates will increase by 0.5%. So, based on what we know so far, what will the personal tax allowance, National Insurance and Income Tax rates be for 2021/22?

National Insurance Rates 

The Government has now published this table of National Insurance rates, limits and thresholds in this pdf file. We have reproduced the figures below for your convenience.

Class 1 NICs (Employee and Employers)

Class 1 NICs: Employee and Employers (£ per week)

Tax year 2020-21

Tax year 2021-22

Weekly Lower Earnings Limit (LEL)

£120

£120

Weekly Primary Threshold (PT)

£183

£184

Weekly Secondary Threshold (ST)

£169

£170

Upper Earnings Limit (UEL)

£962

£967

Upper Secondary Threshold for under 21s

£962

£967

Apprentice Upper Secondary Threshold (AUST) for under 25s

£962

£967

Class 2 NICs (Self Employed)

Class 2 NICs: Self Employed

Tax year 2020-21

Tax year 2021-22

Small Profits Threshold (SPT) (£ per year)

£6,475

£6,515

Class 2 contribution rates

Tax year 2020-21

Tax year 2021-22

Annual Profits (£ per year)

£ per week

£ per week

Below SPT

£3.05 (voluntary)

£3.05 (voluntary)

Above SPT

£3.05

£3.05

Class 3 NICs (Voluntary)

Class 3 NICs: Voluntary Contributions (£ per week)

Tax year 2020-21

Tax year 2021-22

Voluntary contributions

£15.30

£15.40

Class 4 NICs (Self Employed

Class 4 NICs: Self Employed (£ per year)

Tax year 2020-21

Tax year 2021-22

Lower Profits Limit (LPL)

£9,500

£9,568

Upper Profits Limit (UPL)

£50,000

£50,270

Income Tax personal allowance

The personal tax allowance for 2021/22 should increase to £12,570 – up from £12,500 in 2020/21. However, this figure is rounded up to the nearest £10, as required by the Income Tax Act 2007.

Basic rate limit

The income tax basic rate limit should be set at £37,700 – up from £37,500. Once again, this figure is rounded up to the nearest £100, again in accordance with the 2007 Act.

Pensions 

The Lower Earnings Limit (LEL) remains at £120 per week. Basic and new state pensions go up 2.5% from 12 April 2021.

Conclusion

Precise Income Tax rates are normally announced in the Chancellor’s Autumn Statement. For obvious reasons, this didn’t happen last year because of the Coronavirus pandemic. So, while the figures above reflect our understanding of upcoming income tax, personal allowance and NI changes, if further changes are announced we will let you know. Of course, if you’d like help with your annual tax return, please get in touch.

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About Karen Jones

Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

Karen’s specialist skills:

  • Personal Taxation
  • Tax Efficient Planning
  • Trust Administration
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