Tax rates and thresholds
There is a small increase in the personal allowance this year from £12,500 to £12,570. This will necessitate an increase of seven points for those with tax codes ending with suffix L. It is expected that HMRC will issue Form P9X to authorise this increase. The higher rate tax threshold, the point at which 40% tax begins, increases to £50,270. There are no changes to the tax rates for England, Wales, Northern Ireland and Scotland.
Whole of UK values:
| Personal allowance | £12,570 |
| Emergency tax code | 1257L or 1257L/1 (1257LX) |
| Code uplifts | 7 points |
| Monthly taxthreshold | £1,048 |
| Income threshold | £100,000 |
| Marriage allowance | £1,260 |
England, Wales and Northern Ireland:
| 2021/22 earnings band | Rate | 2020/21 earnings band | Rate |
| £1 – £37,700 | 20% | £1 – £37,500 | 20% |
| £37,701 – £150,000 | 40% | £37,501 – £150,000 | 40% |
| Over £150,000 | 45% | Over £150,000 | 45% |
National Insurance
There are no changes to percentages for both employees and employers for tax year 2021/22 and equally the lower earnings limit remains at £120 per week. There is a small increase in the upper earnings limit to £967 p.w. (£50,270 p.a.) in order for it to remain aligned with the 40% tax threshold.
The primary threshold (the point at which employees begin to pay NI) increases to £184 p.w. and the secondary threshold (the point at which employers begin to pay NI) increases to £170 p.w. No changes have been announced to the employment allowance, the apprenticeship levy or the apprenticeship levy allowance.
Auto-enrolment
The earnings trigger for auto-enrolment is unaltered at £10,000 p.a. and the upper and lower qualifying earnings bands are still aligned to the lower earnings limit (£120) and the upper earnings limit (£50,270). There are no changes to percentages, so the total pension contribution remains at 8% of which the employer must pay 3% with 1% tax relief where appropriate.
National minimum wage
There is a potentially expensive change to the national minimum wage (NMW) rules in April. The highest rate, often referred to as the national living wage (NLW), will now be payable to those aged 23 and over, rather than 25. The good news is that the new rate comes into effect for the first pay period that begins on or after 1 April 2021. This means for those that are weekly paid, as 1 April falls mid-week, the increased rates do not have to be paid until the week commencing 5 April. These are the new rates:
| Rate/Age | Current rate | New rate |
| NLW – 25 and over | £8.72 | £8.91 – now from age 23 |
| 21-24 years old | £8.20 | £8.36 – now age 21-22 |
| 18-20 years old | £6.45 | £6.56 |
| 16-17 years old | £4.55 | £4.62 |
| Apprentice rate | £4.15 | £4.30 |
| Accommodation offset | £8.20 | £8.36 |
Pro advice. The voluntary living wage is now £9.50 p.h. and £10.85 p.h. in London. This is a rate calculated by a charitable foundation to reflect the actual cost of living for employees. Employers are not obliged to pay this but if they have chosen to be living wage accredited they have six months from its announcement in November to bring the new rate into force – so by the following April.
Student loans
Higher education is a devolved matter, so the Scottish Parliament has decided to introduce a new student loan plan for repayers who have an outstanding loan from the Student Awards Agency Scotland. Currently they are classed as having a Plan 1 loan alongside English and Welsh repayers who took out their loan pre-September 2012. From April 2021 these Scottish repayers will be moved from Plan 1 to new Plan 4.
Employers will be notified of this by the issue of an SL1 form which will act as a switch notification from Plan 1 to Plan 4. Plan 4 has a significantly higher threshold of £25,000, which means that a number of repayers will see their student loan deductions stop until their earnings reach the threshold. The introduction of Plan 4 necessitates an amended new starter checklist with the questions on the reverse relating to student loans having been updated.
Starter checklist
The questions are complex because question nine asks a negative question. If they say they don’t have a student loan that’s due for repayment yet, they simply sign the form. But many new starters misunderstand the question and say they do have a loan and then go on to complete question 10 with the type of loan.
New starters should only answer question 10 with their loan details if they have either completed their undergraduate or postgraduate qualification since 6 April 2020 or are paying their student loan by direct debit rather than through the payroll (which is only likely to be the case if they have recently been overseas).
It’s also quite likely that repayers will have more than one loan plan, in fact they could have all four. However, payroll software can only set up one undergraduate loan plan plus a postgraduate plan, so what do you do for those with more than one undergraduate plan? You default to the undergraduate plan with the lowest threshold as per the chart below:
| Plan selected | Plan type |
| P45 ticked but no starter checklist supplied | 1 |
| P45 ticked even though Qn 9 said YES, i.e. “no loan” | 1 |
| No plan selected on starter checklist but Qn 9 said NO, i.e. “I have a loan” | 1 |
| Plans 1 and 2 selected | 1 |
| Plans 1, 2 and 4 selected | 1 |
| Plans 2 and 4 selected | 4 |
Statutory payments
The family-related statutory payments rise to £151.97 p.w. for statutory payment weeks that begin on or after 4 April 2021. For employers whose payroll software calculates statutory payments in line with pay periods, the daily rate to split a payment week over the end and start of a pay period is £21.71. For employers it is good news that recovery rates for statutory payments remain at 92% and 103%. For SSP the daily rates are:
| Number of days to pay | |||||||
| QDs in week | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| 7 | 13.77 | 27.53 | 41.30 | 55.06 | 68.83 | 82.59 | 96.35 |
| 6 | 16.06 | 32.12 | 48.18 | 64.24 | 80.30 | 96.35 | |
| 5 | 19.27 | 38.54 | 57.81 | 77.08 | 96.35 | ||
| 4 | 24.09 | 48.18 | 72.27 | 96.35 | |||
| 3 | 32.12 | 64.24 | 96.35 | ||||
| 2 | 48.18 | 96.35 | |||||
| 1 | 96.35 | ||||||
RTI changes
The only significant RTI change this year is the abolition of the earlier year update. There has been parallel running for the last two years with software developers trialling the new year to date full payment submission (YTD FPS). From 6 April 2021 the YTD FPS will be the only mechanism that can be used to correct prior years’ RTI data.