The UK has recently released guidance and information regarding income tax and NIC rates and thresholds for the new year. This 2021 budget includes support for businesses and employers that are struggling as a result of the coronavirus pandemic.
Here’s everything you need to know about the thresholds for income tax and NIC rates in 2021/2022.
Income tax rates and thresholds for 2021/22 and 2020/21
As your yearly earnings increase, the amount you pay in tax only applies to the proportion of your income that falls within that tax band. Here are the new income tax thresholds for 2021/2022.
• Personal allowance (how much you are allowed to earn before you have to pay income tax) has increased from £12,500 to £12,570.
• The basic rate income tax threshold (20% tax on any wages that fall into this threshold) has slightly increased from £12,501 – £50,000 to £12,571 – £50,270.
• The higher rate income tax threshold (which is taxed at 40%) has changed slightly, moving from £50,001 – £150,000 to £50,271 – £150,000.
• There have been no changes to the additional income tax threshold (where you have to pay 45%), which remains at £150,000 upwards.
National insurance contribution rates for 2021/2022
To receive benefits such as the state pension, you first have to make regular contributions to national insurance. The rate you pay depends on whether you are employed, an employer, or are self-employed.
Here are the new NIC rates for employees 2021/2022
• The primary threshold for 2021/2022 is now £9,568. It was previously £9,500.
• The upper earnings limit threshold has increased from £50,000 to £50,270.
• Employers' national insurance threshold has increased from £8,788 to £8,840.
Self-employed national Insurance for 2021/2022
• The small profits threshold for 2021/22 is now £6,515. It was previously £6,475.
• The Class 2 NIC Contribution for 2021/22 remains at £3.05, no change.
What do these changes mean for you and your business?
The threshold changes to income tax and national insurance contributions haven’t changed much, but it is still important that you and your business follow the new rules. If you are confused, contact professional accountants SRB Associates (www.srbassociates.co.uk) in Melton Mowbray, who will be able to assist you.