UK Budget 2021 - deep freeze treatment for tax allowances and thresholds

Mar 08, 2021

The income tax personal allowance (which applies across the UK) and the higher rate thresholds (“HRT”) are increasing as planned to £12,570 and £50,270 respectively from 6 April 2021 but will be maintained at these levels until April 2026.

The HRT for savings and dividend income will also apply UK-wide. The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.

The current inheritance tax thresholds, pensions lifetime allowance and the capital gains tax annual exempt will remain at their existing levels until April 2026.

As previously announced and legislated for in February 2021, in 2021/22 the national insurance contributions (“NICs”) thresholds will rise with inflation, bringing the primary threshold/lower profits limit to £9,568 and the upper earnings limit (UEL)/upper profits limit (UPL) to £50,270.

The UEL/UPL will then remain aligned with the HRT at £50,270 until April 2026. All other NICs thresholds will be considered and set at future fiscal events.

And finally, the 0 percent starting rate band for savings income will remain at £5,000 in 2021/22.