New Income Tax Calculations 2021/2022

Income Tax Changes to Take Note Of

At Spartan Accounting Group, we understand that UK tax can be complex. This system of tax bands, allowances and relief schemes all affect the way individuals and businesses pay tax. Additionally, these rates, bands and allowances typically change on a yearly basis. However, changes are announced in the Budget before the start of the new tax year. The 2021 Budget announcement included support to assist businesses and employers who have been negatively affected by the Coronavirus pandemic. These relief measures include the SEISS Grant for self-employed workers, as well as the Furlough scheme. In this blog, we will have a look at the various changes to take note of when it comes to new income tax calculations 2021/2022.

It is important, first and foremost to note that the 2021/2022 tax year will run from 06 April to 2021 until 05 April 2022. Meaning that all the changes touched on will apply to these dates specifically.

Personal Income Tax Simplified

Tax-free personal allowance refers to the amount of income you, as an individual, are allowed to have before you start paying income tax on it. During the 21 tax year, the personal allowance threshold was £12,500. For the 21/2022 tax year however, this has increased to an amount of £12,570. To put this forward in an example, if you earned £15,000 for the year, the taxable element of your income would be £15,000 – £12,570 = £2,430. Furthermore, there is a specific reduction calculation for personal allowance for high earners. For every £2 that you earn above £100,000, your personal allowance is reduced by £1. This means that if you earn £125,000 or more, your personal allowance is zero.

These calculations are especially important to note when it comes to your businesses payroll. It is essential to ensure that you are deducting and paying over the correct amounts of personal income tax for your employees. This will reduce your chances of a tax audit.

Gaining an Understanding of The Tax Thresholds

Understanding that the amount of income tax that you are liable to pay is often one of the most confusing aspects of personal income tax. It is important to note that the amount of income tax that you pay depends on not only the amount of income you earn, but also how you earn it. The income tax system can be best explained as a set of bands, which can be compared to earning blocks. Each block, or tax band, represents a salary range and you pay tax as a percentage of your income in that specific block.


After the tax free personal allowance band, the next band is the basic rate income tax band. In this particular band, you are liable for 20% tax on the proportion of income that falls into this bracket. The threshold has increased from £12,501 – £50,000, to the 21/2022 threshold of £12,571 – £50,270.

Income Tax Calculations – Additional Personal Income Tax Bands

Once your income total surpasses the basic rate income tax bans, you will potentially be taxed under the higher rate income tax. The part of your income in this tax band is taxed at 40%. The threshold has increased from the 21-year figures of £50,001 – £150,000 to £50,271 – £150,000. Lastly is the additional rate income tax – the highest rate. The income you earn above this threshold is subject to tax at 45% and the threshold remains at £150,000 upwards. Let’s look at another example of personal income tax using the tax bands, for instance, a yearly income amount of £60,000. You will be liable for 0% tax on the first £12,570. Additionally, 20% tax on the part of your income in the next tax bracket (£12,571 up to £50,270) means you’ll pay 20% tax on £37,700. Lastly, 40% tax on the next portion (£50,271 up to £60,000), so you’ll pay 40% tax on £9,730

We also recommend you read Self-employment and Universal Credit. All in all, your personal income tax submissions need not be stressful. Spartan Accounting Group can help you to navigate the new income tax calculations 2021/2022. We recommend getting in touch with one of our small business tax accountants today for more information about our fixed fee accounting services.

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