Personal Taxation

Main personal allowances and reliefs

2021/22

2020/21

Personal allowance1

£12,570

£12,500

Married couple’s / civil partner’s transferable allowance

£1,260

£1,250

Married couple’s / civil partner’s allowance
at 10%2
(if at least one born before 6/4/35)

maximum

£9,125

£9,075

minimum

£3,530

£3,510

Blind person’s allowance

£2,520

£2,500

Rent-a-room tax-free income

£7,500

£7,500

Registered pension schemes

 

 

  • Lifetime allowance

£1,073,100

£1,073,100

  • Annual allowance3

£40,000

£40,000

  • Money purchase annual allowance

£4,000

£4,000

1  Personal allowance reduced by £1 for every £2 of adjusted net income over £100,000.
2  Reduced by £1 for every £2 of adjusted net income over £30,400 (£30,200 for 2020/21), until the minimum is reached.
3  Reduced by £1 for every £2 of adjusted income over £240,000 to a minimum of £4,000, subject to threshold income being over £200,000.

Income tax rates and bands

2021/22

2020/21

UK taxpayers excluding Scottish taxpayers’ non-dividend, non-savings income

20% basic rate on first slice of taxable income up to

£37,700

£37,500

40% higher rate on next slice of taxable income over

£37,700

£37,500

45% additional rate on taxable income over

£150,000

£150,000

All UK taxpayers

Starting rate at 0% – on band of savings income up to4

£5,000

£5,000

Personal savings allowance at 0%:  basic rate taxpayers
higher rate taxpayers
additional rate taxpayers

£1,000
£500
£0

£1,000
£500
£0

Dividend allowance at 0% tax – all individuals

£2,000

£2,000

Tax rates on dividend income:

basic rate taxpayers

7.5%

7.5%

higher rate taxpayers

32.5%

32.5%

additional rate taxpayers

38.1%

38.1%

4 Not available if taxable non-savings income exceeds the starting rate band.

Scottish taxpayers’ non-dividend, non-savings income

2021/22

2020/21

19% starter rate on taxable income up to

£2,097

£2,085

20% basic rate on next slice up to

£12,726

£12,658

21% intermediate rate on next slice up to

£31,092

£30,930

41% higher rate on next slice up to

£150,000

£150,000

46% top rate on income over

£150,000

£150,000

Trusts                                                        

2021/22

2020/21

Standard rate band generally

£1,000

£1,000

Dividends (rate applicable to trusts)

38.1%

38.1%

Other income (rate applicable to trusts)

45%

45%

High income child benefit charge: 1% of benefit per £100 of adjusted net income of £50,000 – £60,000.

Personal taxation and investments

Income tax

The personal allowance will rise to £12,570 and the higher rate threshold for 2021/22 will increase to £50,270, as previously announced. From 2022/23 to 2025/26, both the personal allowance and higher rate threshold will be frozen. In Scotland, the higher rate threshold for non-savings, non-dividend income will rise to £43,662 in 2021/22 as announced in the Scottish Budget.


SAVER
Don’t lose your personal allowance. Your personal allowance of £12,570 in 2021/22 is reduced by 50p for every pound by which your income exceeds £100,000. You could make a pension contribution or a charitable gift to bring your income below £100,000.

National insurance contributions (NICs)

The NIC upper earnings limit and upper profits limit will remain aligned to the higher rate threshold at £50,270 for 2021/22 and through to 2025/26.

Taxation of payments under the self-employment income support scheme (SEISS)

Grants from the SEISS made on or after 6 April 2021 will be taxed in the year of receipt regardless of the accounting year end. Legislation in the Finance Bill will ensure this measure has effect for the tax year 2020/21 and for subsequent tax years.

Income tax exemption for employer-reimbursed COVID-19 tests

There will be an income tax exemption for payments that an employer makes to an employee to reimburse the cost of a relevant coronavirus antigen test in 2020/21 (retrospectively) and 2021/22. The corresponding NIC disregard is already in force for 2020/21 and will be extended to 2021/22.  

Easement for employer-provided bicycles exemption

There will be a time-limited easement to the employer-provided cycle exemption to remove the requirement that employer-provided cycles be used mainly for journeys to, from or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The easement will remain in force until 5 April 2022.

Mortgage guarantee scheme

A new residential mortgage guarantee scheme will run from April 2021 to December 2022, aimed at increasing availability of 91% to 95% loan-to-value mortgages. The maximum property value will be £600,000 and mortgages must be arranged on a repayment basis.

Extension of social investment tax relief (SITR)

The government will extend the operation of SITR to April 2023.

Individual savings account (ISA) subscription limits

The ISA annual subscription limit for 2021/22 will remain at £20,000 and the corresponding limit for junior ISAs (JISAs) and child trust funds (CTFs) will stay at £9,000.


THINK AHEAD
The dividend allowance and personal savings allowance has been frozen since 2018/19. Your ISA allowance is £20,000 in 2020/21 and 2021/22 – use it or lose it.

Green National Savings & Investments (NS&I) product

NS&I will offer a green retail savings product in summer 2021. It will be closely linked to the UK’s sovereign green bond framework, details of which are to be published in June 2021. The first green gilt will also be issued this summer.

Lifetime allowance

The lifetime allowance for pension savings will be frozen at £1,073,100 until April 2026.


THINK AHEAD
The lifetime allowance is frozen at £1,073,100 until April 2026. Regularly review the value of your pension benefits and any ongoing contributions.

Taxation of collective money purchase pensions

Legislation will ensure that collective money purchase pension schemes can operate as registered pension schemes for tax purposes. These are also known as collective defined contribution schemes (CDCs), to be introduced by the Pension Schemes Act 2021.

 

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