The 2021/22 tax year begins on 6 April 2021. The government has implemented limited measures this year although it will start to claw back the monies it has put into coronavirus relief after 2021/22. In this article from Caroline Streatfield Bookkeeping, based in Eastbourne, we look at the key changes in personal tax thresholds and allowances, National Minimum and Living Wage amounts, National Insurance contributions, Corporation tax and VAT.
Changes at a glance
- Individual personal allowances frozen until 2026
- Corporation tax to increase to 25% in 2023
- VAT relief remains at 12.5% and returns to 20% in 2022 (hospitality sector)
- Increases to National Minimum Wage
- National Living Wage extended to 23-24 year olds
- Rise in the threshold for National Insurance contributions (NICs)
Personal tax thresholds and allowances
Your personal tax allowance is the amount you can earn before paying any income tax. After this year, these thresholds will be frozen until 2026.
| 2020/21 | 2021/22 | |
| Basic rate tax | 20% on income between £12,501 and £50,000 | 20% on income between £12,571 and £50,270 |
| Higher rate tax | 40% on income between £50,001 and £150,000 | 40% on income between £50,271 and £150,000 |
| Additional rate tax | 45% on income above £150,000 | 45% on income above £150,000 |
Minimum Wage and Living Wage amounts
There are increases in Minimum Wage rates. The National Living Wage is extended to 23-24 year olds for the first time having previously been limited to those aged 25 and older.
| National Living Wage (Aged 23 and over) | £8.91 |
| National Minimum Wage (Aged 21 to 24) | £8.36 |
| National Minimum Wage (Aged 18 to 20) | £6.56 |
| National Minimum Wage (Under 18) | £4.62 |
| Apprenticeship Rate (Aged under 19 or in first year of apprenticeship) | £4.30 |
National Insurance Contributions
Class 1 NICs (Primary Threshold/Lower Profits Limit) rise to £9,568. The Upper Earnings Limit (UEL)/Upper Profits Limit (UPL) rises to £50,270.
Corporation tax
There is no increase in corporation tax for this year or for next year. However, in April 2023, the tax will rise to 25% on profits over £250,000 which will be referred to as the Upper Profits Threshold. This is actually the first rise in corporation tax since 1974. It’s better news for smaller businesses as there is now a lower threshold for corporation tax, referred to as the Small Profits Rate, which will apply to profits under £50,000 and the rate will remain at 19% as of April 2023. For those businesses with profits between £50,000 and £250,000, there will be a new tiered corporation tax rate from April 2023 onwards although the government has not yet released the details of this.
VAT changes
There are no changes for VAT with the threshold of £85,000 locked until 1 April 2024. However, the reduced rate of 5% for businesses in the hospitality sector which was launched in 2020 and although due to end on 31 March 2021, has been extended until 30 September 2021. From this date a new rate of 12.5% will apply until 31 March 2022 with the 20% rate resuming from 1 April 2022. For the self-employed there are also income tax and VAT deferral schemes in place.
How can Caroline Streatfield Bookkeeping help you with your tax returns?
These are the major changes, but if you have any uncertainty how they will affect your business or your personal tax, please do contact us. Changes to IR35 and how Domestic Reverse Charge VAT will affect your business are explained in more detail in our previous articles. Caroline Streatfield Bookkeeping, based in Eastbourne in East Sussex can help you with your tax returns. Call us on 07982 682746 or 01323 885205 or email info@bookkeepereastbourne.co.uk. We will visit your home or workplace, if possible, within East Sussex and can also work remotely to cover other locations, which are further afield.
Ksenia is the newest member of the team. She previously worked as a bookkeeper and has a good technical knowledge of keeping records for small businesses on 