Tax Allowance 2021/22 Changes | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 01/04/2021

During April many tax allowances and thresholds will increase, which could see consumers gaining more in their monthly wages, but also may result in having to pay higher taxes.

To help consumers and businesses understand the key changes that are due to come into effect this month, we’ve highlighted the main tax changes.

For those who want to know all the tax allowances and thresholds for the 2021/22 tax year, including all business taxes, sign up for our free taxfacts guide.

Wages and income

April sees the income tax threshold increasing from £12,500 to £12,570, while the higher rate threshold will rise from £50,000 to £50,270. This means that workers will be able to earn a higher amount before income tax needs to be paid on their earnings.

In addition to income tax rising, the National Living Wage will also rise by 2.2% to £8.91 an hour and the age in which workers can earn this will be lowered from 25 to 23. Meanwhile, those aged 21-22 will see the National Minimum Wage rise by 2%, from £8.20 to £8.36; for those aged 18-20 it will increase by 1.7% from £6.45 to £6.56; while for those under the age of 18 it increases by 1.5% from £4.55 to £4.62. In addition to this, the apprentice rate increases by 3.6% from £4.15 to £4.30.

Savings threshold

The increase in the income tax threshold means that the personal savings allowance threshold will also increase. This means that from the 6 April 2021, those who earn up to £12,570 can earn up to £5,000 in interest on savings without paying tax. Meanwhile, savers will not enter the higher rate taxpayer threshold until they earn a minimum of £50,271. More information about this can be found reading our story on how the new tax year will impact your personal savings allowance.

When the new tax year starts on the 6 April 2021, ISA savers will see their tax-free ISA allowance re-set. The allowance for the new tax year will remain at £20,000. For those saving into a Junior ISA, the tax-free allowance will also remain at £9,000 when the new tax year starts.

Lifetime ISA (LISA) savers will see the penalty for making withdrawals from their LISA before the age of 60, unless the money is used to purchase a first home, revert back to 25%. The Government had reduced the penalty to 20% at the start of the pandemic, but with the penalty increasing again it means that LISA savers who access their money outside of the penalty-free reasons in the terms and conditions potentially losing some of their own savings.

Pensions

Retirees receiving the full state pension will see their pensions rise by 2.5% resulting in them receiving £179.60 per week. In addition to this pension credit will also increase in the new tax year.

UK Tax Tables 2021/22

Find out all the UK tax allowances and thresholds for 2021/22 for free by signing up for the Moneyfacts.co.uk Taxfacts guide - click here to sign up.

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