WD + Co Autumn Budget Summary 2021 - Flipbook - Page 3
The personal allowance
The personal allowance is currently £12,570. The
Chancellor announced in the March 2021 Budget that
the personal allowance will be frozen at £12,570 for the
tax years 2022/23 to 2025/26.
There is a reduction in the personal allowance for
those with ‘adjusted net income’ over £100,000. The
reduction is £1 for every £2 of income above £100,000.
So there is no personal allowance where adjusted net
income exceeds £125,140.
The marriage allowance
The marriage allowance permits certain couples,
where neither party pays tax in the tax year at a rate
other than the basic rate, to transfer £1,260 of their
personal allowance to their spouse or civil partner.
The marriage allowance reduces the recipient’s
tax bill by up to approximately £250 a year. To
benefit from the marriage allowance one spouse
or civil partner must normally have no income or
income below the personal allowance for the year.
The marriage allowance was first introduced for
2015/16 and there are couples who are entitled
to claim but have not yet done so. It is possible
to claim for all years back to 2017/18 where the
entitlement conditions are met. The total tax
saving for all years up until 2021/22 could be over
£1,000. A claim for 2017/18 will need to be made by
5 April 2022.
Tax bands and rates
The basic rate of tax is 20%. In 2021/22 the band
of income taxable at this rate is £37,700 so that the
threshold at which the 40% band applies is £50,270 for
those who are entitled to the full personal allowance.
At Spring Budget 2021, the Chancellor announced that
the basic rate band will be frozen at £37,700 for the
tax years 2022/23 to 2025/26. The National Insurance
contributions Upper Earnings Limit and Upper Profits
Limit will remain aligned to the higher rate threshold
at £50,270 for these years.
Individuals pay tax at 45% on their income over