-
![Marriage Tax Allowance]()
Marriage Tax Allowance
If you're married or in a civil partnership, you may be entitled to a £1,220 tax break called…
![Free Tax Code Calculator]()
Free Tax Code Calculator
It looks like an innocuous set of digits, but your tax code can have a big impact on your finances.…
Tip Email
FREE Weekly MoneySaving email
For all the latest deals, guides and loopholes simply sign up today - it’s spam free!
Tax Rates 2021/22
Break down what the taxman gets
Updated 6 April 2021
Nothing's as certain as death and taxes. Yet while there's no doubt we'll all be taxed, the rates can change rapidly. This guide covers income tax thresholds, the personal allowance, national insurance and more for the tax year 2021/22, starting 6 April 2021.
Free Income Tax Calculator
To check what your take-home pay should be, including pension contributions and student loan repayments, use our free Income Tax Calculator.
What's my personal tax allowance?
/igd-couple-tax.jpg.rendition.320.320.jpg "Personal Tax Allowance")
Each of us has a 'personal allowance'. This is the amount we can earn without paying any income tax.
If you earn more than your personal allowance, you pay tax at the applicable income tax rate on all earnings above the personal allowance, but the allowance itself remains untaxed.
Married or in a civil partnership? Or earning interest on savings? Remember to read the extra information below.
Tip Email
FREE Weekly MoneySaving email
For all the latest deals, guides and loopholes simply sign up today - it’s spam free!
What income tax band am I in?
Once you know your personal allowance, anything extra earned above that will be subject to income tax. For the 2021/22 tax year, if you live in England, Wales or Northern Ireland, there are three marginal income tax bands – the 20% basic rate, the 40% higher rate and the 45% additional rate (also remember your personal allowance starts to shrink once earnings hit £100,000).
Marginal bands mean you only pay the specified tax rate on that portion of salary. For example, if your salary puts you in the 40% tax bracket, then you only pay 40% tax on the segment of earnings in that income tax band. For the lower part of your earnings, you'll still pay the appropriate 20% or 0%.
If you live in Scotland, there are five marginal income tax bands – the starter rate of 19%, the 20% basic rate, the 21% intermediate rate, the 41% higher rate and the 46% additional rate.
I live in England, Wales or NI – what's my income tax rate for 2021/22?
| EARNINGS (IF YOU LIVE IN ENGLAND, WALES OR NORTHERN IRELAND) | RATE |
|---|---|
| Under your personal allowance (PA) For most, £12,570 |
No income tax payable |
| Between PA and PA + £37,700 (basic rate) For most, over £12,570 to £50,270 |
20% |
| Between PA + £37,701 and £150,000 (higher rate) For most, over £50,270 to £150,000 |
40% (1) |
| Over £150,000 (additional rate) | 45% |
(1) Personal allowance drops by £1 for every £2 earned over £100,000.
| EARNINGS (IF YOU LIVE IN SCOTLAND) | RATE |
|---|---|
| Under your personal allowance (PA) For most, £12,570 |
No income tax payable |
| Between PA and PA + £2,097 (starter rate) For most, over £12,570 to £14,667 |
19% |
| Between PA + £2,097 and PA + £12,726 (basic rate) For most, over £14,667 to £25,296 |
20% |
| Between PA + £12,726 and PA + £31,092 (intermediate rate) For most, over £25,296 to £43,662 |
21% |
| Between PA + £31,092 and £150,000 (higher rate) For most, over £43,662 to £150,000 |
41% (1) |
| Over £150,000 (additional rate) | 46% |
(1) Personal allowance drops by £1 for every £2 earned over £100,000.
National insurance is separate to income tax
While your income tax rate is important, it's not the only thing to affect your take-home pay.
In addition to plain old income tax, most UK workers also have national insurance contributions deducted from their pay. These kick in based on your earnings from the age of 16, and you usually stop paying when you reach state pension age.
What's my 2021/22 national insurance rate?
| EARNINGS TABLE_CELL_STYLE | NATIONAL INSURANCE RATE (FOR EMPLOYED, NOT SELF-EMPLOYED) | |
|---|---|---|
| Per week | Annual salary | |
| Under £184 | Under £9,568 | No national insurance payable |
| £184 to £967 | £9,568 to £50,270 | 12% on everything earned between £184 and £967 a week |
| Over £967 | Over £50,270 | 12% on everything earned between £184 and £967 a week, 2% on everything above that |
| Some advanced national insurance rules are complicated. See the HMRC website for full rates. | ||
Capital gains tax
Capital gains tax (CGT) is one of the least common taxes on income, and for many it won't apply. However, if you sell or give away an asset worth more than £6,000, you could have to pay CGT. It doesn't apply for main homes, cars or lottery/pools winnings, among other things.
Each year, individuals have an 'annual exempt amount' that allows them to receive some gains tax-free. Above this, you pay CGT on all gains.
2020/21 capital gains tax
| Annual exempt amount | £12,300 for individuals |
|---|---|
| Standard CGT rate | 18% on residential property, 10% on other assets |
| Higher CGT rate | 28% on residential property, 20% on other assets |
| Your rate of CGT will depend on your other taxable income. See Gov.uk for more on how to work this out, and for more on the increased annual exempt amount, see this Gov.uk webpage. | |
Dividend tax
There are two ways you make money from investing. One is when the shares increase in value and then you reap a nice profit when you sell them. The other is when they pay dividends.
Dividends are a bit like interest on a savings account. If a company makes a profit, it gives some of it back to you – it could be on a regular basis or as a one-off. And just as you have a personal savings allowance for tax-free interest on savings, you also have a tax-free dividends allowance.
The allowance for tax-free dividends is unchanged at £2,000 for the 2021/22 tax year and there's no change for dividend tax.
Any dividends received above this allowance are taxed at the rates shown below, unless your shares are held in a stocks & shares ISA (where dividends are always tax-free).
If you earn more than £2,000 a year in dividend income outside of a stocks & shares ISA, you'll need to inform HM Revenue & Customs.
No change for dividend tax
| TAX BRACKET | RATE |
|---|---|
| Basic rate | 7.5% |
| Higher rate | 32.5% |
| Additional rate | 38.1% |
Paying into a pension?
/igd-nest-money.jpg.rendition.320.320.jpg)
One of the key attractions of pensions is the tax breaks they give savers. Generally, when you put money into a pension, the Government tops up your contribution with tax relief.
How much tax relief do I get on my pension contributions?
Basic-rate taxpayers receive 20% tax relief on their pension contributions. Higher-rate taxpayers can get up to 40% relief – or up to 45% for top-rate taxpayers – though they may need to claim the additional relief through their tax returns. Scottish taxpayers paying slightly higher rates of income tax (21%, 41% or 46%) than elsewhere in the UK also need to claim their extra tax through their tax returns.
If you're not a taxpayer – eg, you don't earn enough to pay income tax – but are contributing to a pension, you'll still have the tax saving added to your contributions up to a certain amount. You'll be given an extra £20 for every £80 you pay into a pension up until you've contributed £2,880. This means the Government tops up your pension to £3,600.
Is there a limit on tax relief I can get?
Generally, you can put as much as you earn each tax year into your pension and receive tax relief, up to an annual contribution limit of £40,000.
This limit – called the annual allowance – includes the money you put into your pension, the basic-rate tax relief the Government adds, and any contributions your employer makes.
However, for high earners with incomes over £240,000, the £40,000 annual allowance is reduced.
When does tax relief become tax charge?
The pension lifetime allowance – a limit on the total value you can build up in all your pensions without suffering a tax charge – is £1,073,100 for 2021/22.
Pension contribution limits
| Annual tax-free contribution limit | £40,000 |
|---|---|
| Lifetime tax-free contribution limit | £1,073,100 |
To check what your take-home pay should be, including pension contributions and student loan repayments, use our free Income Tax Calculator.
Tip Email
FREE Weekly MoneySaving email
For all the latest deals, guides and loopholes simply sign up today - it’s spam free!
Spotted out of date info/broken links? Email: brokenlink@moneysavingexpert.com
-
Martin Lewis: Take weekly screen grabs of your online energy account in case your supplier goes bust
24 September 2021![]()
In the first episode of a new series of his live ITV show, MoneySavingExpert.com founder Martin Lewis has urged households across the country to take a screenshot of their energy account incase their provider goes bust. In the past couple of weeks alone, five energy providers have gone bust with households expecting a significant rise in energy bills this winter. -
JP Morgan launches new 'Chase' bank account that pays 1% cashback and 5% interest - here's how it compares
24 September 2021![]()
Investment bank JP Morgan has this week announced the launch of a brand new current account called 'Chase'. It offers customers 1% cashback on most spending for a year, 5% interest on savings made when you round-up purchases, and fee-free debit card use abroad. But most can only get it from November and you could earn up to £130 switching bank account NOW, so is Chase worth it? -
Tips will be guaranteed to go directly to hospitality staff under new laws
24 September 2021![]()
The change, which the Government says will be implemented as soon as Parliamentary time allows for it, will make it illegal for employers to withhold tips from their workers. -
Nectar card holders can now get personalised discounts when they shop using Sainsbury's 'scan and go' service in stores
24 September 2021![]()
Nectar card holders can now get personalised discounts of up to 30% off certain items in their Sainsbury's shop when they use its 'scan and go' service in store. But you can't currently get the offers when you shop online at the supermarket. -
PCR travel test providers given official warning amid concerns over misleading prices and unfair practices
24 September 2021![]()
PCR Covid test providers have been told by the Competition and Markets Authority (CMA) to clean up their practices amid concerns they may be breaking consumer law. An open letter has been written by the watchdog identifying a number of "harmful" practices, which it says it will further investigate.
-
Five things EVERYONE should know about student finance
21 September 2021![]()
There are more myths and misunderstandings about student finance than any other subject. So in this blog is my updated 2021/22 version of the must knows, with links to far more info. -
Is it time to ban Christmas presents?
14 September 2021![]()
Update September 2017: It’s eight years since I first braved this subject, expecting a snowstorm of protest. Instead, year after year more join in, like Julia who recently tweeted me, “@MartinSLewis, finally took your advice and told my family I can’t afford Christmas presents. What a weight off my mind. Thank you.” One year even the Archbishop of...
MSE Tools & Calculators
Clever ways to calculate your finances
