Tax rates & thresholds for employers from 6 April

Tax rates and thresholds

Tax rates & thresholds for employers from 6 April 2021 – 5 April 2022

As things currently stand (and subject to confirmation in the Chancellor’s Budget on 3rd March 2021), the tax rates and thresholds to be used by employers from 6 April 2021 are as follows:

Employee personal allowance – £242 per week; £1,048 per month; £12,570 per annum

Basic rate tax – 20% on annual earnings above the PA threshold (£12,570) up to £37,700

Higher tax rate – 40% on annual earnings from £37,701 up to £150,000

Additional tax rate – 45% on annual earnings above £150,000

Emergency tax codes:

1257L W1

1257L M1

1257L X

National Insurance

Employers can only make deductions on earnings above the lower earnings limit of £120 per week (£520 per month/£6,240 per annum)

Class 1A National Insurance Contributions

Class 1A NICs are due on benefits given to employees. Such benefits could include company cars, healthcare insurance, beneficial loans but there are many more benefits which attract Class 1A NIC. There are also salary sacrifice arrangements to consider – the rules can get complex.

Class 1A NICs are also due on termination awards above £30,000 at a rate of 13.8%.

What happens next?

Given the unprecedented levels of debt and the Chancellor’s need to deliver a sustainable economic recovery plan in next month’s Budget, it is expected that some taxes will rise to pay for the Covid-19 support packages.

Whilst the triple lock manifesto pledge prevents tax rises for income, NI and VAT, all eyes are on taxing through stealth, i.e., not increasing these tax thresholds in line with inflation. As for increasing tax rates, this could be in the form of higher corporation tax and CGT.

We will bring you the key highlights from the Budget on 3rd March and we’re here to discuss what they mean for you and your business. Please get in touch with [email protected] or call 01527 558539 to find out how we can help you.