Personal: Income tax thresholds frozen until 2026
Rates & allowances
The tax-free personal allowance throughout the UK will increase to £12,570 for the 2021/22 tax year.
The basic-rate band will rise to £37,700, while the higher-rate threshold will rise to £50,270. The additional-rate band will remain at £150,000.
All of these thresholds will remain unchanged until 2025/26.
In Scotland, the starter rate will rise to £14,667 and the basic rate will increase to £25,296. The intermediate rate will also rise to £43,662. The top rate will remain frozen for income over £150,000.
National living wage
The national living wage now applicable to over-23s increases by 2.2% from £8.72 an hour to £8.91 an hour from April 2021.
National Insurance contributions
The threshold for class 1 primary contributions paid by employees and the class 4 national insurance contributions (NICs) paid by the self-employed will increase from £9,500 to £9,568 for the 2021/22 tax year.
From April 2021, the upper earnings limit and upper profits limit will increase from £50,000 to £50,270.
At the same time, the class 2 NICs rate for the self-employed will remain at £3.05 a week for 2021/22, while the self-employed small profits threshold will rise to £6,515.
ISAs
All of the subscription limits will remain unchanged. For ISAs, this will be £20,000 and for Junior ISAs and child trust funds it will be £9,000.
Trading losses
At present, an unincorporated business, such as a sole trader or partner in a partnership, can claim to offset losses against their net income of the current or previous year, or both years.
For trading losses made in 2020/21 and 2021/22, you will be able to carry back for a period of three years, with losses being carried back against later years first. Some further restrictions apply.
Capital gains tax
The current annual exempt amount for individuals and personal representatives of £12,300 and £6,150 for trustees of settlements will be maintained at these levels for each tax year up to and including the 2025/26 tax year.
Business asset disposal relief & investors’ relief
The lifetime limit on qualifying gains for business asset disposal relief will remain at £1m for 2021/22.
The lifetime limit for investors’ relief will also be kept at the current level of £10m. The 10% tax rate remains unchanged.
Gift holdover relief
Gift holdover relief will not be available where a non-UK resident person disposes of an asset to a foreign-controlled company, controlled either by themselves or another non-UK resident with whom they are connected. This measure will apply to disposals made on or after 6 April 2021.
Company van benefit
From 6 April 2021, the company van benefit which arises where a van is made available to an employee for private use will increase to £3,500.
Company car & van fuel benefit
The company car fuel benefit multiplier increases from £24,500 to £24,600 from 6 April 2021.
The flat rate charge for the van fuel benefit will increase from £666 to £669 from 6 April 2021.
Pension lifetime allowance
The lifetime allowance for pension savings will remain at £1,073,100 until the 2025/26 tax year.
Marriage allowance
The transferable marriage allowance will increase from £1,250 to £1,260 for 2021/22.
Inheritance tax
The individual nil-rate band will continue at £325,000 and the residence nil-rate band will also remain at £175,000. The taper threshold for the residence nil-rate band continues to start at £2m.
Social investment tax relief
The previous end date of the social investment tax relief of 6 April 2021 has been extended to 6 April 2023.
This applies to investments in qualifying social enterprises and will allow income tax relief and capital gains tax holdover relief for investors to continue.
Income tax bands & rates – England, Northern Ireland & Wales
| Band | 2021/22 | Rate | 2020/21 | Rate |
| Personal allowance | Up to £12,570 | Nil | Up to £12,500 | Nil |
| Basic-rate | Over £12,570 – £50,270 | 20% | Over £12,500 – £50,000 | 20% |
| Higher-rate | Over £50,270 – £150,000 | 40% | Over £50,000 – £150,000 | 40% |
| Additional-rate | Above £150,000 | 45% | Above £150,000 | 45% |
*The personal allowance is reduced by £1 for every £2 of income from £100,000 to £125,140.