The 2021/22 tax year will commence from 6th April 2021, and with it comes new figures for the year ahead. We’ve put the following short blog together to cover essential tax information and changes for the 2021/22 tax year.
National Minimum Wage for the 2021/22 tax year (NMW)
- Ages 23 and above: £8.91
- Ages 21 to 22: £8.36
- Ages 18 to 20: £6.56
- Under 18: £4.62
- Apprenticeship hourly rate (ages 19 or under, or first year apprentices): £4.30
Personal allowance thresholds for the 2021/22 tax year (income tax)
- The personal allowance: 0% up to £12,570
- Basic rate tax: 20% between £12,571 and £50,270
- Higher rate tax: 40% between £50,271 and £150,000
- Additional rate tax: 45% on earnings over £150,000
There is no increase in corporation tax for the new 2021/22 tax year (remaining 19%), and this is expected to be the same for the next tax year too. However, an Upper Profits Threshold will come into effect in April 2023, and profits over £250,000 will be subjected to 25% tax.
Dividend tax changes for the 2021/22 tax year
- Tax free amount: Up to £2,000
- Basic rate dividend tax: 7.5% (dividends between £2,001 and £37,700)
- Higher rate dividend tax: 32.5% (dividends between £37,701 and £150,000)
- Additional rate dividend tax: 38.1% (dividends exceeding £150,001)
VAT rates for the 2021/22 tax year
- VAT rates are unchanged.
- Standard rate: 20% (majority of goods and services)
- Reduced rate: 5% (for example, energy for home)
- Zero rate: 0% (for example, most food, clothing for children, etc.)
- VAT threshold remains £85,000, meaning small businesses must register for VAT if profits exceed £85,000.
Coronavirus information (VAT)
The hospitality sector will benefit from reduced VAT rate of 5% and this will run until 30th September 2021. Then, the rate of VAT will rise from 5% to 12.5% until 31st March 2022. The normal rate of VAT (20%) will resume in the hospitality sector from 1st April 2022.
Other sectors will benefit in a similar way:
- Catering: rate of 4.5% VAT until 30th September 2021. The rate will rise from 4.5% to 8.5% until 31st March 2022.
- Hotels (and additional accommodation): 0% VAT until 30th September 2021. Then there will be a 5.5% rate until 31st March 2022.
- Pubs: 1% VAT until 30th September 2021. Then the rate will rise to 4% to the 31st March 2022.
Changes to off-payroll in the private sector (IR35) will come into effect from 6th April 2021, and they will have a significant impact on the private sector. Contractors working through a personal service company (PSC) will no longer determine their IR35 status. Instead, this will become the responsibility of the end-hirer (medium and large businesses). The government rolled out similar legislation into the public sector in 2017, and as a result, demand for umbrella companies rose – as more contractors found themselves inside IR35. A similar trend has already come to light in the private sector, and umbrella companies are in higher demand than ever before.