The 2021/22 tax year started on 6th April 2021 and will run until 5th April 2022. We have put together this quick guide to help you understand the personal income tax rates, allowances and reliefs that may be available to you. For taxpayers based in Scotland, rates and allowances for Scottish Income Tax may be found here.
Please Note: This post has been provided for your information only and does not constitute advice.
Income tax is charged in various stages based on the total amount of income you receive in a given tax year. The first stage is known as your Personal Allowance, and this is how much income you may receive each year without paying tax. The Personal Allowance for the 2021/22 tax year is £12,570. However, if you receive over £100k of income then you will lose your Personal Allowance at a rate of £1 for every £2 that you earn.
Income Tax Bands and Rates
Once you have used up your Personal Allowance for the year, the income you have earned above the tax-free Personal Allowance will be taxed incrementally depending on the amount you have earned. The tax bands, also known as tax brackets, for the 2021/22 year are as follows:
|Tax Band||Taxable Income||Tax Rate|
|Personal Allowance||£0 – £12,570||0%|
|Basic Rate||£12,571 – £50,270||20%|
|Higher Rate||£50,271 – £150,000||40%|
|Additional Rate||Over £150,000||45%|
Other Income Tax Allowances
In addition to the Personal Allowance, there are additional savings, investment, trading and non-trading allowances which may be claimed against the income you have earned. However, please note that the rules surrounding who may claim these allowances do vary and, both who may claim and how much they may claim, will not be the same in all cases.
|Income Source||Tax Free Allowance||Further Information Available From|
|Savings Interest||Up to £5000 pa||https://www.gov.uk/apply-tax-free-interest-on-savings|
|Dividends||Up to £2000 pa||https://www.gov.uk/tax-on-dividends|
|Casual Earnings||Up to £1000 pa||https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#trade|
|Up to £1000 pa||https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income#property|
Tax relief functions in a similar way to the tax allowances mentioned above. However, instead of reducing your income, they are used to reduce your tax bill for the year. You may be eligible to claim relief from tax if you:
- Have made contributions to your pension
- Have made a charitable donation
- Have paid maintenance to an ex-spouse or civil partner
- Have spent time working on a ship outside of the U.K.
- Are married or in a civil partnership
- Have paid for work expenses and have not been reimbursed – e.g. travel to visit a client
We always recommend speaking to an experienced accountant for information tailored to your individual circumstances. Whether you are a private tax client, a new business or an established business looking to take that next step, get in touch for a free no-obligation consultation to see how we can help.
Whether you are a private tax client, a new business or an established business looking to take that next step, get in touch for a free no-obligation consultation to see how we can help! Request a Quote or Contact Us
You can also call Personal Tax Centre Monday to Friday, 9am to 4pm.