TAX RATES

Personal tax rates are set for tax years starting from 6 April. Corporation tax rates are set for financial years starting from 1 April.

Plant and machinery

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However, tax relief is available on certain capital expenditure in the form of capital allowances.

Plant and machinery allowances may be available on items such as machines, equipment, furniture, certain fixtures in a building, computers, cars, vans and similar equipment used in a business.

There are special rules for cars and certain 'environmentally friendly' equipment.

Plant and machinery allowances may be available to owners of commercial property which is let out to a business.

The Annual Investment Allowances (AIA) gives a 100% write-off on most types of plant and machinery (but not cars) up to an annual limit.

Writing down allowances (WDA) are given for expenditure for which AIA is not, or cannot be, claimed.

A Structures and Buildings Allowance of 3% may be available for qualifying investments to construct new, or renovate old, non-residential structures and buildings.

AIA

Special rules apply to accounting periods straddling the dates shown in the tables below.

The AIA may need to be shared between certain businesses under common ownership.

AIA limits - companies

Expenditure incurredAnnual limit (£)
From 1 January 2019 to 31 December 2021
1,000,000
From 1 January 2022
200,000

AIA limits - sole traders and partnerships:

Expenditure incurredAnnual limit (£)
From 1 January 2019 to 31 December 2021
1,000,000
From 1 January 2022
200,000

Other plant and machinery allowances

Expenditure upon which AIA is not given/claimed will obtain relief through the ‘Main rate pool’ or the ‘Special rate pool’ rather than each item being dealt with separately.

The annual rate of WDA is 18% in the ‘Main rate pool’ and 6% in the ‘Special rate pool’.

A 100% first year allowance (FYA) may be available on certain energy efficient plant and cars.

Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new FYA. A company will be allowed to claim a super-deduction of 130% on certain new plant and machinery investments that ordinarily qualify for the 18% WDA and a 50% FYA on most new plant and machinery investments that ordinarily qualify for the 6% WDA.

Corporation tax rates are set for each Financial Year. A Financial Year runs from 1 April to the following 31 March.

If the accounting period of a company straddles the 31 March, the profits are apportioned on a time basis to each Financial Year.

The Northern Ireland Executive has committed to setting the rate of corporation tax at 12.5% when the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Profits band (£)Year to 31.3.22 (%)Year to 31.3.21 (%)
All
19
19

Income tax applies to the amount of income after deduction of personal allowances.

Income is taxed in a specific order with savings and dividend income taxed last.

Dividend income and savings income falling within the dividend and savings allowances still form part of total income of an individual.

There is also a starting rate band (SRB) of £5,000 which is only applicable to savings income. The band is not available if the taxable amount of non-savings income exceeds the SRB.

The Scottish Parliament set the rates of income tax and the limits at which these rates apply for Scottish residents on non-savings and non-dividend income.

Income tax is devolved to Wales on non-savings and non-dividend income.

2021/22:

TypeBand of taxable income (£)Rate (%)Rate if dividends (%)
Basic rate
0 - 37,700
20
7.5
Higher rate
37,701 - 150,000
40
32.5
Additional rate
Over 150,000
45
38.1

For Scottish residents the following bands apply for non-savings and non-dividend income:

TypeBand of taxable income (£)Rate (%)
Starter rate
0 - 2,097
19
Basic rate
2,098 - 12,726
20
Intermediate rate
12,727 - 31,092
21
Higher rate
31,093 - 150,000
41
Top rate
Over 150,000
46

For Welsh residents the following bands apply for non-savings and non-dividend income:

Band of taxable income (£)UK Rate (%)Welsh Rate (%)Overall Rate (%)
0 - 37,700
10
10
20
37,701 - 150,000
30
10
40
Over 150,000
35
10
45

There are special rates for savings and dividend income falling into above bands of taxable income.

Savings Allowance:

Band of taxpayerAmount (£)Rate (%)
Basic rate
1,000
0
Higher rate
500
0
Additional rate
0
N/a

Dividend Allowance:

Band of taxpayerAmount (£)Rate (%)
All
2,000
0

2020/21:

TypeBand of taxable income (£)Rate (%)Rate if dividends (%)
Starting rate for savings
0 - 5,000
0
N/a
Basic rate
0 - 37,500
20
7.5
Higher rate
37,501 - 150,000
40
32.5
Additional rate
Over 150,000
45
38.1

For Scottish residents the following bands apply for non-savings and non-dividend income:

TypeBand of taxable income (£)Rate (%)
Starter rate
0 - 2,085
19
Basic rate
2,086 - 12,658
20
Intermediate rate
12,659 - 30,930
21
Higher rate
30,931 - 150,000
41
Top rate
Over 150,000
46

For Welsh residents the following bands apply for non-savings and non-dividend income:

Band of taxable income (£)UK Rate (%)Welsh Rate (%)Overall Rate (%)
0 - 37,500
10
10
20
37,501 - 150,000
30
10
40
Over 150,000
35
10
45

There are special rates for savings and dividend income falling into above bands of taxable income.

Savings Allowance:

Band of taxpayerAmount (£)Rate (%)
Basic rate
1,000
0
Higher rate
500
0
Additional rate
0
N/a

Dividend Allowance:

Band of taxpayerAmount (£)Rate (%)
All
2,000
0

 

Allowances

A personal allowance gives an individual an annual amount of income free from income tax.

Income above the personal allowances is subject to income tax.

The personal allowance will be reduced if an individual's ‘adjusted net income’ is above £100,000. The allowance is reduced by £1 for every £2 of income above £100,000.

An individual born before 6 April 1935 may be entitled to a married couple's allowance but this is reduced if ‘adjusted net income’ is above the married couple's allowance income limit (see table below).

Marriage allowance - 10% of the personal allowance may be transferable between certain spouses where neither pays tax above the basic rate. The Marriage allowance is not available to couples entitled to the Married Couple's allowance.

Personal Allowance

Allowances2021/22 (£)2020/21 (£)
Personal allowance
12,570
12,500
Marriage allowance
1,260
1,250

Blind person's allowance

£2,520 (2020/21: £2,500)

Married couple's allowance

Either partner born before 6th April 1935.

Reduction in tax bill2021/22 (£)2020/21 (£)
Maximum
912.50
907.50
Minimum
353.00
351.10
Age allowance income limit 1
30,400
30,200

IHT may be payable when an individual's estate is worth more than the IHT nil rate band when they die.

Lifetime and death transfers between UK domiciled spouses are exempt from IHT.

For 2021/22, a further nil rate band of £175,000 may be available in relation to current or former residences.

The IHT threshold available on death may be increased for surviving spouses as there may have been a nil rate band not used, or not fully used, on the previous death.

There are reliefs for some business and farming assets which reduce their value for IHT purposes.

IHT may also be payable on gifts made in an individual's lifetime but within seven years of death.

Some lifetime gifts are exempt.

Transfers of assets into trust made in an individual's lifetime may be subject to an immediate charge but at lifetime rates.

There are also charges on some trusts.

Threshold

Standard nil rate band: £325,000

Rates

Rate%
Lifetime rate
20
Death rate
40
Death rate if sufficient charitable legacies made
36

Reliefs for lifetime gifts

Annual Exemption: £3,000

Small Gifts: £250

Marriage: The amount of relief depends on who the gift is from...

Gift fromAmount (£)
Parent
5,000
Grandparent
2,500
Other
1,000

Reduced charge on gifts within seven years of death

Years before death% of death charge
0-3
100
3-4
80
4-5
60
5-6
40
6-7
20
Class 1

Employees start paying Class 1 NIC from age 16 (if sufficient earnings).

Employers pay Class 1 NIC in accordance with the table below.

Employer NIC for employees under the age of 21 and apprentices under the age of 25 is reduced from the normal rate of 13.8% to 0% up to the Upper Secondary Threshold of £967 per week. Also applies to veterans in the first 12 months of employment.

Employees Class 1 NIC stop when they reach their ‘State pension age’. The employer's contribution continues.

Employees

2021/22:

Earnings per week%
Up to £184
Nil
£184.01 - £967
12
Over £967
2

Entitlement to state pension and other ‘contribution-based benefits’ is retained for earnings between £120 and £184 per week

2020/21:

Earnings per week%
Up to £183
Nil
£183.01 - £962
12
Over £962
2

Entitlement to state pension and other ‘contribution-based benefits’  is retained for earnings between £118 and £166 per week

Employers

2021/22:

Earnings per week%
Up to £170
Nil
Over £170
13.8

2020/21:

Earnings per week%
Up to £169
Nil
Over £169
13.8

Other National Insurance payable by employers

Class 1A

13.8% on broadly all taxable benefits provided to employees and on certain taxable termination and sporting testimonial payments in excess of £30,000.

Class 1B

13.8% on taxable PAYE Settlement Agreements.

Class 2 and 4 (self-employed)

A self-employed person starts paying Class 2 and Class 4 NIC from 16 or over (if sufficient profits).

Class 2 NIC stop when a person reaches State Pension age.

Class 4 NIC stop from the start of the tax year after the one in which the person reaches State Pension age.

2021/22:

Class 2(£)
Flat rate per week
3.05
Small Profits Threshold (per year)
6,515

2020/21:

Class 2(£)
Flat rate per week
3.05
Small Profits Threshold (per year)
6,475

No Class 2 is due if the amount of trading profits assessable to income tax and Class 4 NIC is below this figure. However, a person might decide to carry on paying Class 2 voluntarily to accrue entitlement to the State Pension and entitlement to other benefits.

Class 4

2021/22:

Annual profits%
Up to £9,568Nil
£9,568.01 - £50,2709
Over £50,2702

2020/21:

Annual profits%
Up to £9,500Nil
£9,500.01 - £50,0009
Over £50,0002
Class 3

A person needs 35 years (30 years if State Pension age is before 6 April 2016) of NIC to get a full State Pension.

Class 3 voluntary contributions can be paid to fill or avoid gaps in a NI record.

Flat rate per week: £15.40 (2020/21: £15.30)

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction. If you buy shares electronically Stamp Duty Reserve Tax (SDRT) is payable. For shares purchased using a stock transfer form, you will pay Stamp Duty if the transaction is over £1,000.

Stamp Duty Land Tax

SDLT is payable on land and property transactions in England and Northern Ireland.

Property transactions in Scotland are subject to Land and Buildings Transaction Tax (LBTT).

Property transactions in Wales are subject to Land Transaction Tax (LTT).

Residential property

The rates apply to the portion of the total value which falls within each band. The following rates apply to 30 June 2021:

Consideration (£)Rate (%)
0 - 500,000
0
500,001 - 925,000
5
925,001 - 1,500,000
10
1,500,001 and above
12

The following rates apply from 1 July to 30 September 2021:

Consideration (£)Rate (%)
0 - 250,000
0
250,001 - 925,000
5
925,001 - 1,500,000
10
1,500,001 and above
12

The following rates apply from 1 October 2021:

Consideration (£)Rate (%)
0 - 125,000
0
125,001 - 250,000
2
250,001 - 925,000
5
925,001 - 1,500,000
10
1,500,001 and above
12

These rates may be increased by 3% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief

From 1 July 2021 First-time buyers may be eligible for first-time buyer relief on purchases of residential property up to £500,000. The rates apply to the portion of the total value which falls within each band.

Consideration (£)Rate (%)
0 - 300,000
0
300,001 - 500,000
5
for purchases over 500,000
normal rates apply

Non-residential property

Payable on consideration which falls in each band.

Consideration (£)Rate (%)
0 - 150,000
0
150,001 - 250,000
2
Over 250,000
5

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) is payable on land and property transactions in Scotland.

Residential property

Consideration (£)Rate (%)
0 - 145,000
0
145,001 - 250,000
2
250,001 - 325,000
5
325,001 - 750,000
10
750,001 and above
12

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties, costing over £40,000, are acquired.

First-time Buyer relief raises the zero rate tax threshold for first-time buyers from £145,000 to £175,000.

Non-residential property

Consideration (£)Rate (%)
0 - 150,000
0
150,001 - 250,000
1
Over 250,000
5

The rates apply to the portion of the total value which falls within each band.

Land Transaction Tax

Land Transaction Tax (LTT) is payable on land and property transactions in Wales.

Residential property

Rates applying to 30 June 2021:

Consideration (£)Rate (%)
0 - 250,000
0
250,001 - 400,000
5
400,001 - 750,000
7.5
750,001 - 1,500,000
10
1,500,000 and above
12

Rates applying from 1 July 2021:

Consideration (£)Rate (%)
0 - 180,000
0
180,001 - 250,000
3.5
250,001 - 400,000
5
400,001 - 750,000
7.5
750,001 - 1,500,000
10
1,500,000 and above
12

The rates apply to the portion of the total value which falls within each band.

Residential rates may be increased by 4% where further residential properties costing over £40,000 or over are acquired.

Higher residential tax rates

Higher residential rates may apply when you already own one or more residential properties.

Consideration (£)Rate (%)
0 - 180,000
4
180,001 - 250,000
7.5
250,001 - 400,000
9
400,001 - 750,000
11.5
750,001 - 1,500,000
14
1,500,000 and above
16

The rates apply to the portion of the total value which falls within each band.

Non-residential property

Consideration (£)Rate (%)
0 - 225,000
0
225,001 - 250,000
1
250,001 - 1,000,000
5
Over 1,000,000
6

The rates apply to the portion of the total value which falls within each band.

Payments may be required from an employer if an employee is not at work for a variety of reasons.

There are detailed conditions for an employee to qualify for any of these statutory payments.

Employees are only eligible for a statutory payment if they have sufficient average weekly earnings of at least the lower earnings limit.

2021/22:

TypeMax payment periodAmount (£)
Statutory Sick Pay
96.35
Statutory Maternity Pay
First six weeks
90% of weekly earnings
Next 33 weeks
151.97
Statutory Paternity Pay
2 weeks
151.97
Statutory Adoption Pay
First six weeks
90% of weekly earnings
Next 33 weeks
151.97
Shared Parental Pay
151.97
Statutory Parental Bereavement Pay - two weeks
151.97

Average weekly earnings £120 or over.

With the exception of Statutory Sick Pay, statutory payments may be payable at 90% average weekly earnings throughout the payment period in certain circumstances. This applies where 90% weekly earnings are less than the standard rate of £151.97.

2020/21:

TypeMax payment periodAmount (£)
Statutory Sick Pay
95.85
Statutory Maternity Pay
First six weeks
90% of weekly earnings
Next 33 weeks
151.20
Statutory Paternity Pay
2 weeks
151.20
Statutory Adoption Pay
First six weeks
90% of weekly earnings
Next 33 weeks
151.20
Shared Parental Pay
151.20
Statutory Parental Bereavement Pay - two weeks
151.20

Average weekly earnings £120 or over.

With the exception of Statutory Sick Pay, statutory payments may be payable at 90% average weekly earnings throughout the payment period in certain circumstances. This applies where 90% weekly earnings are less than the standard rate of £151.20.

Statutory Sick Pay

Payments may be required from an employer if an employee is too ill to work.

SSP is generally payable for a period up to 28 weeks.

SSP support during coronavirus outbreak

The government has temporarily made SSP more accessible to employees in response to the coronavirus outbreak. During the outbreak SSP is available from the first day of absence, including for those self-isolating or caring for others.

The government is supporting small and medium-sized businesses and employers to cope with the extra costs of paying coronavirus related SSP by refunding eligible SSP costs.

Statutory Maternity Pay

Payments may be required from an employer when an employee takes time off to have a baby.

SMP is payable for a period up to 39 weeks.

Statutory Paternity Pay

Payments may be required from an employer when an employee takes time off during their partner's Statutory Maternity Pay period.

Payment is for a period of either one or two complete weeks.

Shared Parental Pay

Payments may be required from an employer when an employee takes time off following the curtailment of the period of SMP by the mother.

Payment is for up to a maximum of 37 weeks and is dependent on the mother's unused SMP period.

Statutory Adoption Pay

Payments may be required from an employer when an employee takes time off when they adopt a child.

Payment is for a period up to 39 weeks.

Statutory Parental Bereavement Pay

Payments may be required from an employer when parents take time off following the death of a child or a stillbirth.

Payment is for up to a maximum of two weeks.

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme (EIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. Individuals are entitled to relief on investments in certain unquoted trading companies through EIS. A junior version of EIS the SEIS is also available.

Maximum investment per annum: £1,000,000

Additional investment limit where investing in knowledge-intensive companies: £1,000,000

Income tax relief: 30%

CGT treatment on disposal if held for 3 years: Exempt

Capital gains from the disposal of other assets may be deferred by making an EIS investment.

Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) provides tax relief for individuals prepared to invest in new and growing companies. Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business. SEIS is a junior version of EIS.

Maximum investment per annum: £100,000

Income tax relief: 50%

CGT treatment on disposal if held for 3 years: Exempt

Capital gains from the disposal of other assets may be exempt up to £50,000 per annum by making an SEIS investment.

Social Investment Relief (SIR)

Social Investment Relief (SIR) is designed to encourage private individuals to invest in social enterprises including charities. Individuals are entitled to relief on their investment:

Maximum investment per annum: £1,000,000

Income tax relief: 30%

CGT treatment on disposal if held for 3 years: Exempt

Capital gains from the disposal of other assets may be deferred by making a SIR investment.

Venture Capital Trusts (VCTs)

Venture Capital Trusts (VCTs) are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies. VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment. Individuals are entitled to relief on investments in VCTs.

Maximum investment per annum: £200,000

Income tax relief: 30%

Dividend income: Exempt

Capital gains treatment on disposal: Exempt

(All reliefs are subject to detailed conditions being met.)

Car Benefit

The car benefit is calculated by multiplying the car's list price, when new, by a percentage linked to the car's CO2 emissions. Due to a change in the way CO2 emissions are measured different benefit percentages apply to cars registered from 6 April 2020.

For diesel cars generally add a 4% supplement (unless the car is registered on or after 1 September 2017 and meets the Euro 6d emissions standard). The overall maximum percentage is capped at 37%.

The list price includes accessories.

The list price is reduced for capital contributions made by the employee up to £5,000.

Special rules may apply to cars provided for disabled employees.

For cars registered before 1 January 1998 and cars with no agreed CO2 emissions the charge is based on engine size.

2021/22:

CO2 emissions (gm/km)Registered Pre 6 April 2020Registered after 5/4/20
% of car's price taxed% of car's price taxed
0
1
1
1-50: Electric range >130
2
1
1-50: Electric range 70-129
5
4
1-50: Electric range 40-69
8
7
1-50: Electric range 30-39
12
11
1-50: Electric range <30
14
13
51-54
15
14
55-59
16
15
60-64
17
16
65-69
18
17
70-74
19
18
75-79
20
19
80-84
21
20
85-89
22
21
90-94
23
22
95-99
24
23
100-104
25
24
105-109
26
25
110-114
27
26
115-119
28
27
120-124
29
28
125-129
30
29
130-134
31
30
135-139
32
31
140-144
33
32
145-149
34
33
150-154
35
34
155-159
36
35
160-164
37
36
165and above
37
37

2020/21:

CO2 emissions (gm/km)Registered Pre 6/4/20Registered after 5/4/20
% of car's price taxed% of car's price taxed
0
0
0
1-50: Electric range >130
2
0
1-50: Electric range 70-129
5
3
1-50: Electric range 40-69
8
6
1-50: Electric range 30-39
12
10
1-50: Electric range <30
14
12
51-54
15
13
55-59
16
14
60-64
17
15
65-69
18
16
70-74
19
17
75-79
20
18
80-84
21
19
85-89
22
20
90-94
23
21
95-99
24
22
100-104
25
23
105-109
26
24
110-114
27
25
115-119
28
26
120-124
29
27
125-129
30
28
130-134
31
29
135-139
32
30
140-144
33
31
145-149
34
32
150-154
35
33
155-159
36
34
160-164
37
35
165-169
37
36
170 and above
37
37

Note...

Round down to nearest 5gm/km for values above 95

Car Fuel Benefit

Car fuel benefit applies if an employee has the benefit of private fuel for a company car.

The benefit is calculated by applying the percentage used to calculate the car benefit by a 'fuel charge multiplier'.

The charge is proportionately reduced if provision of private fuel ceases part way through the year. The fuel benefit is reduced to nil only if the employee pays for all private fuel.

Fuel charge multiplier: £24,600 (2020/21: £24,500)

Van Benefit

Van benefit is chargeable if the van is available for an employee's private use.

A fuel benefit may also be chargeable if an employee has the benefit of private fuel paid for in respect of a company van.

The charges do not apply to vans if a 'restricted private use condition' is met throughout the year.

A reduced benefit charge may apply to vans which cannot emit CO2 when driven.

Van benefit: £3,500 (2020/21: £3,490)

Fuel benefit: £669 (2020/21: £666)

Advisory Fuel Rates for Company Cars

Advisory rates only apply where employers reimburse employees for business travel in a company car or require employees to repay the cost of fuel used for private travel in a company car.

If the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NIC liability.

From 1 March 2021:

Petrol

Engine size (cc)Pence per mile
1400 or less
10
1401 to 2000
12
Over 2000
18

Diesel

Engine size (cc)Pence per mile
1600 or less
9
1601 to 2000
11
Over 2000
12

LPG

Engine size (cc)Pence per mile
1400 or less
7
1401 to 2000
8
Over 2000
12

Notes...

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for fuel car benefit purposes.

Mileage Allowance Payments (MAPs) for employees

MAPs represent the maximum tax-free mileage allowances an employee can receive from their employer for using their own vehicle for business journeys.

An employer is allowed to pay an employee a certain amount of MAPs each year without having to report payments to HMRC.

If the employee receives less than the statutory rate, tax relief can be claimed on the difference.

2021/22 and 2020/21:

Vehicle typePence per mile
Cars and vans
- up to 10,000 miles
45
- over 10,000 miles
25
Bicycles
20
Motorcycles
24

 

Low emissions:

For expenditure incurred on cars, costs are generally allocated to one of the two plant and machinery pools.

AIA is not available on any car but a 100% FYA may be available on certain cars. To qualify for FYA, the car must be purchased new.

Cars acquired from April 2021:

Emissions (g/km)PoolAllowance
0
Main rate
100% FYA
≤ 50
Main rate
18% WDA
> 50
Special rate
6% WDA

WIM Accountants are here to help businesses with their accounting and taxation needs.

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