Rishi Sunak may have to break income tax promise says expert
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In the UK, the amount of tax someone pays depends on their earnings. The 2020/2021 tax year will draw to a close on April 5, 2021. From April 6, the 2021/2022 tax year will begin and some tax allowances will rise. Read on to find out more about the increases.
What is the Personal Allowance?
Income Tax is a tax on earnings, but it is only paid on earnings over a certain amount.
The Personal Allowance is the amount someone can earn before they start paying tax.
The Government sets the amount of the Personal Allowance and it usually increases every year.
How much will tax allowances rise by in 2021/2022?
The Personal Allowance is currently set at £12,500 for the 2020/2021 tax year.
In 2021/2022, the Personal Allowance will rise by 0.5 percent to £12,570.
The income limit for the Personal Allowance will remain at £100,000 for the 2021/2022 tax year.
The income limit for married couple’s allowance will rise, from £30,200 to £30,400.
The Government website explains: “The Personal Allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the £100,000 limit.
“This reduction applies irrespective of date of birth.
“The Income limit for married couple’s allowance is an age-related allowance.
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“It is reduced by £1 for every £2 of income over this limit.”
For income between £12,501 and £50,000, the basic rate of Income Tax is 20 percent.
The higher-rate Income Tax threshold of 40 percent is currently £50,000, but this will rise to £50,270 in April 2021.
The additional-rate Income Tax threshold of 45 percent is currently £150,000 and this rate will remain the same for April 2021.
Will tax thresholds rise in 2022?
In the Budget in March 2021, Chancellor Rishi Sunak announced Income Tax thresholds will be frozen until 2026 to deal with the economic situation caused by coronavirus.
This means over the next few years, some people could find their income puts them in a higher tax bracket.
Therefore, some people will have to pay more tax in the future than they would have should thresholds have risen every year.
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