UK income tax rates 2021/2022

Below is the UK income tax rates 2021/2022 to help you to calculate your income tax liability. Your self-assessment period is from 6 April to 5 April and you must deliver your self-assessment return to HMRC by 31 January each year.

England, Wales and Northern Ireland Income tax rates 2021/2022

Personal Allowanceup to £12,570 per year0%
Basic rate£12,570 to £37,70020%
Higher rate£37,701 to £150,00040%
Additional rate over£150,00045%
Source: GOV.UK

Scotland Income tax rates 2021/2022

Personal AllowanceUp to £12,5700%
Starter rateOn annual earning above the PAYE tax threshold and up to £2,09719%
Basic rateon annual earnings from £2,098 to £12,72620%
Intermediate rate£12,727 to £31,09221%
Higher rate£31,093 to £150,00041%
Top rateabove £150,00046%
Source: GOV.UK

Self-employed through a limited company

If you are self-employed individual trading through a limited company and you withdraw money from your company through salary and dividend payment, your salary and dividend amount enter in your self-assessment return form must agree to your signed and dated company accounts and corporation tax return filed with HMRC.

Your total salary for the tax year can also be obtained from your P60 form.

Take note that corporation tax rates 2020/2022 are not the same as the UK income tax rates 2021/2022.

In addition to the above, there is another important document you must submit to Companies House for your limited company that is your confirmation statement.

If you require help with your company accounts, corporation tax return, self-assessment return and confirmation statement filings, feel free to contact our accountants and they will be more than happy to help you.

Hire staff from outside the UK

Your company must register as a licensed visa sponsor with the UK Visas and Immigration (UKVI) to hire staff from outside the UK beginning 1 January 2021.

This includes hiring people from the following countries:

  • The EU  
  • Iceland
  • Liechtenstein
  • Norway
  • Switzerland

Who arrived in the UK after 31 December 2020 because the UK has left the EU and the transition period ended 31 December 2020.

The people your company is recruiting must also meet the new job, the language and the salary requirements set by the UK Immigration Department called the Home Office.

Licensed visa sponsor for UK employers

You can apply for your employer licensed visa sponsor from the UK Visas and Immigration.

Once approved, the Home Office will a certificate of sponsorship to you. Your license will be valid for 4 years.

Once your company has become a licensed visa sponsor, you must maintain your employer’s responsibilities as set out by the UK Visas and Immigration (UKVI). For example, if your company has ceased trading and you are going to dissolve your company.

Hire Staff from outside the UK that does not require a licensed visa sponsor

The licensed visa sponsor rule does not apply to the staff from the following countries you already employ in the UK and were living in the UK by 31 December 2020.

  • The EEA
  • Swiss citizens

They and their family members can apply to the EU Settlement Scheme by 30 June 2021.

Besides, making sure you apply for a licensed visa sponsor before hiring staff from outside the UK and maintaining your responsibilities as a licensed visa sponsor employer, remember to maintain your company filings with Companies House. Deliver your confirmation statement and company accounts to Companies House promptly to avoid a late filing penalty.

Introduce flexible working hours into your business

Introduce flexible working hours into your business allows you to retain and recruit talented individuals that cannot commit to a standard 9 am to 5 pm, full-time job. Flexible working hours attract individuals with young children, caring responsibilities or other commitments to work for your business.

Also, your existing staff whose family circumstances have changed and unable to continue to work the standard 9 am to 5 pm job to stay and take advantage of your flexible working hours scheme. You save costs on training new staff when you can retain your skilled staff.

There are many types of flexible working hours schemes you can consider to introduce into your business.

Term-time working hours

The term time flexible working hours scheme would attract individuals and staff with young children to apply for the job because they can spend time with their children during school holidays.

Annualised working hours

Annualised working hours set the number of hours for your staff to fulfil during the year. The hours may vary week by week and month by month. This scheme is suitable for seasonal labour requirement business.

Job sharing

Job sharing is to have two or more staff sharing one job. This arrangement gives you the continuity of service if one staff is ill, you have the other staff to cover.

The staff involved with the same job can also share their skills to make their job more efficient.

Voluntary reduced working time

Voluntary reduced working time is you and your staff agreed on the reduced working hours voluntarily in exchange for a reduced salary and employee benefits.

This scheme allows you to open up the job to wide range of people to make up the hours.

Employment breaks

You can offer employment breaks to staff who would otherwise leave for good. For example, if your staff would like to take a year off work for personal reason. You may offer he/she an employment break so that he/she can come back to work for your business after that. With this you retain great staff.

Sabbatical leave

Sabbatical means a break from work. You can allow your employees to take sabbatical leave to pursue their interest outside their work, for example, to travel or study or to write a book etc.

Some companies offer sabbatical leave as part of their employee benefit. For example, you may offer 2 months of Sabbatical leave to employees on the 1oth year of service. Your business will retain talented individuals to stay thus low staff turnover.

This leave is in addition to the standard annual leave, maternity, paternity and sick leave offer to your employees.

Choose the flexible working hours scheme that suits your business and communicate with your accountant or your payroll bureau or your Human Resources department about your decision so that they can set up the payroll system for the scheme and maintain the required PAYE reporting to HMRC.

In addition, if your business is a company registered with Companies House, remember to file your confirmation statement and company accounts promptly.

Isolation note from NHS 111 online

UK employers will be able to verify their employees’ isolation note on the NHS website soon.

Your employee who seeks medical advice from NHS during the coronavirus outbreak can get an isolation note online.

The note will have the following details about your employees:

  • the 16 digits reference numbers.
  • your employee’s name
  • Your employee’s date of birth
  • Start date and the end date of isolation

The isolation note is issued by the NHS and it is an official confirmation of an employee absent from work either they have to self isolate because they have symptoms or their family members have symptoms of coronavirus. They must self isolate immediately to prevent the spread of the virus.

Additionally, your employee may use the note as proof that they are unwell and following the government guidance to self-isolate. Companies who paid statutory sick pay to employees who self isolate would entitle to a refund from the government.

Besides, companies are given an additional three month to file their company accounts with Companies House with no late filing penalty. However, you must apply to extend your filing deadline with Companies House. You can do it online and it only takes 15 minutes.

Universally, you may use the Companies House web filing service to submit your company accounts and confirmation statement online. For this purpose, you would require your company’s authentication code to file online.

If you have any questions about your company filings, contact us.

Payroll Real Time Information

Payroll Real Time Information (often abbreviated as RTI) reporting with HM Revenue and Customs is compulsory if you are under the Pay As You Earn (PAYE) scheme.

Under the scheme, each time you make a salary payment you must report the income tax and national insurance contribution payable by your staff and your company before or on the day. You do this by submitting FPS form online.

If your company payroll is on monthly basis then you must submit FPS every month. However, if no salary was made in any months, you must submit the form called EPS stating zero payment was made.

Generally, your company is the employer thus has the responsibility to ensure correct income tax and national insurance contribution are deducted correctly from your staff. Subsequently, pay it over to HMRC.

One man company

PAYE payroll for a limited company, where the director is also the owner of the company. As long as your director intend to withdraw money from the company through salary and bonus payments, you must register for PAYE. Correspondingly, you must submit PAYE forms with HM Revenue and Customs. In this case, your director would be considered an employee of the company.

Payroll real time information software

There are many independent payroll software providers you may choose. Usually, purchase of the software comes with technical support. You may call them if you do not know how to use the software for Real time Information reporting.

Free payroll software

Furthermore, there is also free payroll software for small companies with no more than 10 staff. The Gov.UK website gives a few recommendations.

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