Now that we are in a new tax year HMRC have updated various allowances and tax rates for 2021/22. We understand that not everyone can keep up with the changes in legislation and what impact it will have on their business, so we have summarised the key changes below:
Personal Allowance & Higher Rate Band
The Personal Allowance (which is the tax free amount an individual can earn before paying Income Tax) has been increased by £70 to £12,570 for the year.
The Higher Rate Band has also increased to £37,701 above the Personal Allowance (up to £150k).
These changes reflect a small tax saving for the average person.
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National Insurance (NI)
Class 1 NI (for Employees and Employers):
Primary Threshold increased to £797 per month (from £792 per month).
Secondary Threshold increased to £737 per month (from £732 per month).
Upper Earning Limit increased to £4,189 per month (from £4,167 per month).
Class 2 NI (Self Employed) – the threshold has increased to £6,515 for the year (from £6,475) and the rate has stayed the same at £3.05 per week. This means that if you are Self Employed (or a Partner in a Partnership) then you will pay £3.05 per week in Class 2 NI if your profits (or share of profits) are over £6,515 for the tax year.
Class 4 NI (Self Employed):
The Lower Profits Limit has increased to £9,568 (from £9,500) – 9% NI above this up t the Upper Profits Limit.
The Upper Profits Limit has increased to £50,270 (from £50,000) – 2% NI above £50,270.
Corporation Tax & Dividends
Corporation Tax has stayed the same at 19% of taxable profits for the company. The Dividend tax rates and allowances have also stayed the same.
Businesses will need to ensure that they are utilising the changes in allowances to the maximum to ensure they are paying the right amount of tax and not overpaying.
If you are unsure what these changes mean to you and your business, then contact us today at [email protected] or call us on 01237 478246 for a free, no obligations call with experienced and qualified chartered accountants.
We offer a full digital accountancy and bookkeeping service to the whole of the UK (excluding Northern Ireland), however, our key local services areas are Bideford, Barnstaple, Torrington, South Molton and the surrounding areas.