NO CHANGES TO INCOME TAX RATES AND PERSONAL ALLOWANCE FROZEN
The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.
The personal allowance and higher rate threshold have been increased in line with inflation to £12,570 and £50,270 respectively for 2021/22. These thresholds will then be frozen until 2025/26 possibly yielding an extra £19 billion for the government.
There had again been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. Note that the first £2,000 of dividend income continues to be tax-free.
NATIONAL INSURANCE RATES
The national insurance contribution (NIC) rates and bandings were announced 16 December 2020 to take effect from 6 April 2021.
Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,570 of earnings for 2021/22, an increase of £1 a week. The employee contribution rate continues to be 12% up to the Upper Earnings limit £50,270, with the self-employed paying 9% on their profits up to the same level. Note that employer contributions will apply to earnings over £170 per week, £8,840 per annum which is also a £1 a week increase.
SDLT THRESHOLDS EXTENDED
Last March in order to stimulate the housing market the Chancellor announced a temporary cut in Stamp Duty Land Tax for home buyers across England and Northern Ireland which was scheduled to last until 31 March 2021.
This has now been further extended until 30 June 2021 so that transactions in progress will continue to benefit from the reduced rates.
As a transitional measure from 1 July 2021, the Nil Rate Band of Residential SDLT in England and Northern Ireland will then decrease to £250,000 for 3 months until 1 October 2021 when it will revert to £125,000 for purchases completed on or after that date. There has been no change to the SDLT rates above the Nil Rate Band. The 3% supplementary charge for second and subsequent homes in England and Northern Ireland will continue to apply.
Note that there are different rates of tax on property transactions in Scotland and Wales as such taxes have been devolved in those countries.
5% MORTGAGE SCHEMES EXTENDED
Another measure announced to stimulate the housing sector is a new 95% mortgage scheme guaranteed by the government that will mean that people buying a house will only need a 5% deposit where the purchase price is no more than £600,000.