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1014. Tax year 2021-22 changes?
 
HMRC's new tax year starts only on 6th April of every year. However the option to start the new tax year in our service is available after 31st March. Our system will be automatically updated and fully compliant with the legislative changes from the start of the new tax year.

When moving to new tax year 2021-22, please take a note of the following changes below :-

1) Global Tax Code set to 1257L
2) Income Tax Rates and Bandwidth
3) Auto Enrolment Minimum Contribution Rates
4) Statutory Payment Rates
5) Student Loan Rates
6) Postgraduate Loan Deductions
7) Company Car Fuel Rates
8) National Minimum Wage
9) National Insurance contributions
10) Termination awards and sporting testimonial payments
11) Employment Allowance
12) Holiday pay average
13) Full Payment Submission (YTD FPS) in place of Earlier Year Update (EYU)
14) Off payroll working in private sector
15) Employer Payment Summary (EPS)
16) Coronavirus Job Retention Scheme

1) Global Tax Code set to 1257L

Employee Personal allowance will be £12,570 for the tax year 2021-22.

Tax Codes(UK)
Emergency Tax Code 1257L
L Suffix Uplift 7
M Suffix Uplift 8
N Suffix Uplift 6

(S1257L in Scotland, C1257L in Wales).

(There are also uplifts for tax codes ending in the letter M, which increase by 8, and letter ‘N’ which increase by 6).

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2) Income Tax Rates and Bandwidth

Personal allowance will increase from £12,500 to £12,570 for the tax year 2021-22. The new threshold for PAYE is £242 per week (£1,048 per month). Below are the income tax rates and bandwidth for UK and Scotland that will come into effect from 6th April 2021.

UK Rate of Income Tax:
Table below shows the changes to UK rate of income tax bandwidths from 6 April 2021.

UK Rate % Bandwidth
Basic Rate 20% £1 to £37,700
Higher Rate 40% £37,701 to £150,000
Additional Rate 45% £150,001 and above

Scottish Rate of Income Tax:
Table below shows the changes to Scottish rate of income tax bandwidths from 6 April 2021.

Scottish Rate % Bandwidth
Starter Rate 19% £1 to £2,097
Basic Rate 20% £2,098 to £12,726
Intermediate Rate 21% £12,727 to £31,092
Higher Rate 41% £31,093 to £150,000
Top Rate 46% £150,001 and above

Welsh Rate of Income Tax:
Table below shows the Welsh rate of income tax bandwidths from 6 April 2021.

Welish Rate % Bandwidth
Basic Rate 20% £1 to £37,700
Higher Rate 40% £37,701 to £150,000
Additional Rate 45% £150,001 and above

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3) Auto Enrolment Mininmum Contribution Rates

The auto enrollement mininmum contribution rate remain unchanged.

Date contribution
Employer Minimum contribution
Employee Minimum contribution
Total Minimum contribution
6th April 2021 onwards
3%
5%
8%

The Lower level of Qualifying Earnings remains at £120 per week / £520 per month for 2021-22

The Upper level of Qualifying Earnings increases to £967 per week / £4,189 per month for 2021-22

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4) Statutory Payment Rates

Statutory payment rate (weekly) for the tax year 2021-2022 are shown in the table below.

Statutory Sick Pay(Weekly) £96.35
Statutory Maternity Pay (Weekly) £151.97
Statutory Paternity Pay (Weekly) £151.97
Statutory Adoption Pay (Weekly) £151.97
Statutory Shared Parental Pay(Weekly) £151.97
Statutory Parental Bereavement Pay(Weekly) £151.97

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5) Student Loan Rates

From 6 April 2021 onward student loan threshold for

1. Plan Type 1 will increase from £19,390 to £19,895 per year.
2. Plan Type 2 will increase from £26,575 to £27,295 per year.
3. Plan Type 4 is £25,000

Only thresholds are different for both the plans but the calculation method and deduction rate(9%) remains the same.

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6) Postgraduate loan deductions

The post graduate loan deduction will remain same.The employee earnings threshold for post graduationis £21,000 per year and loan deduction rate is 6%.

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7) Company cars fuel rates

For the current tax year 2021-22 HMRC needs addtional information about the employee's company's car.Tax will be applicable to those who's car benefit is payrolled (only to payroll application not for the P11D).

The car fuel rate for the year the tax 2021-22 as below:

Engine Size
Petrol-amount per mile
LPG-amount per mile
1400cc or less
10 pence
7 pence
1401cc to 20000cc
11 pence
8 pence
Over 2000cc
17 pence
12 pence

 

Engine Size
Diesel-amount per mile
1600cc or less
8 pence
1601cc to 2000cc
10 pence
Over 2000cc
12 pence

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8) National Minimum Wage Rates Changes

The national minimum wage rate from 1st April 2021 are shown in the below table.

Category of worker
Hourly rate
Aged 23 and above (national living wage rate)
£8.91
Aged 21 to 22 inclusive
£8.36
Aged 18 to 20 inclusive
£6.56
Aged under 18 (but above compulsory school leaving age)
£4.62
Apprentices aged under 19
£4.30
Apprentices aged 19 and over, but in the first year of their apprenticeship
£4.30

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9) National Insurance Contribution

National Insurance Contributions(NIC) Rates for the tax year 2021-22 are shown in below tables.

Employee NI Rates expressed as decimal

National Insurance category letter Earnings at or above LEL upto and including ST
Earnings above ST up to and including UEL/UST/AUST Balance of earning above UEL/UST/AUST
A 0 0.12 0.02
B 0 0.0585 0.02
C NIL NIL NIL
H 0 0.12 0.02
J 0 0.02 0.02
M 0 0.12 0.02
Z 0 0.02 0.02
 

Employer NI Rates expressed as decimal

National Insurance category letter Earnings at or above LEL upto and including ST Earnings above ST up to and including UEL/UST/AUST
Balance of earning above UEL/UST/AUST
A 0 0.1380 0.1380
B 0 0.1380 0.1380
C 0 0.1380 0.1380
H 0 0 0.1380
J 0 0.1380 0.1380
M 0 0 0.1380
Z 0 0 0.1380
 

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10) Termination awards and sporting testimonial payments

Class 1A National Insurance contributions are due on the amount of termination awards paid to employees which exceed £30,000 and on the amount of sporting testimonial payments paid by independent committees which exceed £100,000. You report and pay Class 1A on these types of payments during the tax year as part of our payroll.

National Insurance class
2021 to 2022 rate
Class 1A
13.8%

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11) Employment allowance

The rules regarding which businesses qualify for the Employment Allowance (EA) will remain same. The amount of the EA is not changing, and will remain same at £4000 for 2021-22. It is important that you understand these new rules before claiming the EA for 2021-22.

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12) Holiday pay average

In the spring budget of 2020, the introduction of a National Insurance holiday for employers that hire former members of the UK regular armed forces was announced. The holiday will exempt employers from any National Insurance contributions liability on a veteran’s salary up to the Upper Secondary Threshold (UST) in their first year of civilian employment (the employee will still be liable for National Insurance contributions)

This relief will be available from April 2021. Employers will be able to claim this relief for 12 months starting from the first day of the veterans first civilian employment after leaving Her Majesty’s armed forces. Subsequent employers will be able to claim this relief during this 12 month period. See National Insurance contributions relief for employers who hire veterans for more details.

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13) Earlier Year FPS

It is now possible to send a Full Payment Submission (FPS) for a previous tax year and after 19th April in the current tax year. From 2021/2022 onwards, you can no longer send an Earlier Year Update (EYU) to correct any mistakes made in the previous tax year – you can only send an YTD FPS to report revised year-to-date payment data after the 19th April.

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14) Off Payroll Working

Off payroll working the workers who provides the services through intermediary.The intermediary usally be the own personal complay , a partnership, a managed service or individual company this rule is also knwon as ‘IR35’. From 6 April 2021, all public sector clients and medium or large-sized private sector clients will be responsible for deciding your worker’s employment status. This includes some charities and third sector organisations.

If the off-payroll working rules apply, the fee payer (the public authority, agency or other third party who is responsible for paying the worker’s intermediary) must:

  • Calculate a deemed direct payment to account for employment taxes associated with the contract
  • Deduct those taxes from the payment to the worker’s intermediary
  • Report taxes deducted to HMRC through RTI, Full Payment Submission (FPS)
  • Pay the relevant NICs

If your worker provides services to a public sector client, or a medium or large-sized private sector client, they:

  • Should get an employment status determination from the client, as well as the reasons behind that determination.
  • Will be able to dispute the determination given to them if they disagree with it.

Different rules apply if your worker:

  • does not get an employment status determination from the client
  • provides services to small clients in the private sector

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15) Employer Payment Summary (EPS)

The new change in EPS from this tax year onwords are you need to fill the addtional information about the employer before you file the EPS to HMRC.The addtional information required is,

Economic Activity Details:

  • Is Employer in Agricultural sector?
  • Is Employer in the Fisheries and Aquaculture sector?
  • Is Employer in the Road Transport sector?
  • Is Employer in the Industrial sector?
  • Do State-aid rules apply to the Employer?
Note: You can only fill these section when the Employment Allowance Indicator is "YES". Without the indicator is yes you can't fill the Economic activity details.

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16) Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme is to be extended until the end of September 2021 with the government to continue paying 80% of employees' wages for hours they cannot work. Employers will be asked to contribute 10% for July and 20% for August and September.

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