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The 2021-2022 tax year – everything you need to know

The tax year 2021-2022 - what you need to know

The 2021-2022 tax year is almost upon us. But what will this mean for you? Here, I explain where you could win and where you could lose.

When does the tax year start?

The new tax year starts on 6 April, 2021.

How could I be better off?

1) Minimum wage

On 1 April (so a few days ahead of the new tax year), the minimum wage is set to increase. Everybody will see an uplift and for the first time ever, those between the ages of 23 and 24 are included in the top tier rate. That means that people within that age bracket, who are paid minimum wage, will be £0.71p per hour better off.

The minimum wage is going from:

  • 25 and over: £8.72 per hour
  • 21-24: £8.20 per hour
  • 18-20: £6.45 per hour
  • 16-17:  £4.55 per hour
  • Apprentices: £4.15 per hour

To:

  • 23 and over: £8.91 per hour
  • 21-22: £8.36 per hour
  • 18-20: £6.56 per hour
  • 16-17:  £4.62 per hour
  • Apprentices: £4.30 per hour

2) Personal tax allowance

The personal tax allowance (the amount you can earn before you start paying tax) is increasing to £12,570 at the start of the tax year. This represents a tax free increase of £70 per year.

The starting point for 40% tax payers will also increase from £50,001, to £50,271.

3) Pension rate

During the 2021-2022 tax year, the pension rate is set to increase by 2.5%. This means that somebody receiving full credits can expect to receive £179.60 per week, up from £175.20.

Pension credit is also rising from £173.75 to £177.10.

4) Statutory sick pay

Statutory sick pay will rise to £96.35 a week, from £95.85 per week.

The amount you need to earn to qualify for it will remain at £120 a week.

5) Parenthood pay

Maternity, paternity, adoption and shared parental pay is also set to increase. It is going up to £151.97 a week, from £151.20, meaning you’ll be 77p per week better off. This obviously won’t make much of a difference in real terms, so if you’re worried about this, check out my guide to budgeting for maternity leave.

6) Working tax credits

Those on working tax credits will get a one-off £500 payment to help them through the ongoing pandemic.

You will get the bonus if you received one of the following payments on 2 March, 2021:

  • A working tax credit payment
  • Both s working tax credit and a child tax credit payment
  • A tax credit payment

Those that are eligible for this bonus should receive it by 23 April, 2021.

7) Disability Living Allowance & PIP

The higher rate of Disability Living Allowance is set to increase to £89.60 per week (from £89.15). The lower amount is going from £23.60 to £23.70 and the middle amount is going from £59.70 to £60.

Meanwhile, the Personal Independence Payment (PIP) is increasing to £89.60 per week (from £89.15) for enhanced claimants. Whilst standard claimants will receive £60 per week (up from £59.70).

8) Housing benefit

Housing benefit for under 25’s is going up to £59.20 per week (from £58.90). Over 25’s will see an increase form £74.35 per week to £74.70.

Main phase ESA will also go up to £74.70 at the start of the 2021-2022 tax year. This is an increase of 35p.

Where could I lose out?

1) Council tax

Almost everybody will see a council tax increase from 6 April. The exact rise will depend on your band and your local authority. But the jump could be up to 5%. If you want to find out what your council tax band is, then this handy tool will help.

2) Prescription charges

The NHS prescription charge in England will increase on 1 April to £9.35.

The three-month PPC will become £30.25 and a 12-month PPC will be £108.10. Click here to work out if an NHC PCC could save you money.

3) Car tax

The VED (which I call ‘road tax’) is going up for some this year. Those that buy cars that emit between 76g and 150g of CO2 per kilometre will have to pay £5 extra for the year.

The Chancellor has frozen the rate for new cars that are kinder to the environment. Those that emit between 1g and 50g per kilometre will pay £10 for the first 12 months and those driving cars emitting between 51g and 75g will pay £25.

The standard rate that you pay after the second year will be £155 per year (this applies to cars registered on or after 1 April, 2017). This applies to all car, with the exception of zero emission vehicles.

4) TV Licence

On 1 April, 2021, the annual TV licence fee will rise from £157.50, to £159.

Everything you need to know about the 2021-2022 tax year

How much difference will it make?

It might seem that these tax year changes are minimal and in some cases we are only talking about a tiny lift. However, it’s important to know what you’re getting and when you should be receiving it from. Once you have your new figures, check out my free interactive budget planner.

So if you’re on minimum wage, then make sure you receive that jump. If you pay for your prescriptions and you’re concerned about the increased price, then calculate if you’d be better off with a PCC certificate. These changes might seem tiny and inconsequential, but the little amounts add up and it’s important that you’re on top of your income and what you’re spending.

If you enjoyed this piece, then check out my money section for similar articles.

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