The 2021 Budget - Personal Tax & National Insurance
Posted on 26th April 2021 at 15:10
Everything you need to know about the personal tax and National Insurance allowances in the April 2021 Budget.
From 6th April 2021
Personal allowance increased to £12,570.
Higher rate threshold extends to £50,270.
Personal savings allowance remains:
- Basic rate tax payers £1,000
- Higher rate tax payers £500.
Dividend allowance remains at £2,000.
Personal allowance continues to be reduced by £1 for every £2 of income above the £100,000 limit.
Transferrable marriage allowance increased to £1,260.
Income tax rate and thresholds on non-savings, non-dividends income for Scottish/Welsh taxpayers will be set by Scottish and Welsh Parliaments.
Budget announced
Until 5 April 2026:
Personal allowance frozen at £12,570.
Higher rate threshold frozen at £50,270.
Although this technically isn’t an increase in income tax, there will be an increase in tax take, in real terms, over the coming years.
National Insurance - Tax Rates and Bands
Class 1, from 6 April 2021
The primary threshold increased from £183 to £184 per week. This is the amount at which an employee is required to make contributions and equates to £9,568 per year.
The secondary threshold increased from £169 to £170 per week.
This is the amount at which an employer is required to make contributions and equates to £8,840 per year.
The upper earnings limit increased from £962 to £967 per week or £50,270 annually and this is the same for both employee and employer.
Rates remain unchanged for employees are 0% up to primary threshold, 12% for earning between primary threshold and upper earnings limit and 2% for income over that.
Rates remain unchanged for employers too and are 0% up to secondary threshold and 13.8% for income over that.
Employment allowance (per employer) remains at £4,000 per year, but for smaller businesses only (i.e.- Employers with an NI bill of £100,000 or more in the previous year will not be able to claim it.)
Class 2
The threshold at which you will be required to make Class 2 contributions has increased on 6 April 2021 from £6,475 to £6,515.
The weekly rate remains at £3.05 per week.
This can be paid voluntarily if you are self employed in order to claim another year for state benefit purposes and is cheaper than making Class 3 voluntary contributions which are now £15.40 per week.
Class 4
From 6 April 2021 Lower limit increased from £9,500 to £9,568.
From 6 April 2021 Upper limit increased from £50,000 to £50,270.
The rates remain unchanged and are 9% for profits between Lower limit and upper limit and 2% above the upper limit.
Personal Allowances
|
|
2020/21 |
2021/22 |
|
Salary (assumes 2% pay rise) |
£28,710 |
£29,284 |
|
Less: personal allowance |
(£12,500) |
(£12,570) |
|
Taxable Income |
£16,210 |
£16,714 |
|
Tax due @ 20% |
£3,242 |
£3,342 |
|
Employee’s NIC due @ 12% on salary less threshold |
£2,305 |
£2,365 |
|
Effective rate of tax and NIC |
19.32% |
19.48% |
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