UK Tax year and personal allowance for self-employed

The tax year in the United Kingdom runs from April 6 to April 5, not January to December as in the calendar year to what people in other countries are used to.

One of the UK income tax allowances is the personal allowance, which allows taxpayers to receive a certain amount of money tax-free per year. You have some exemptions per tax year, such as how much you can raise, invest, and put into your pension before you have to start paying tax on it. Every tax year, the figure is updated and revealed as part of the government's Autumn Budget.

When does the UK's 2021/2022 tax year begin and end?

The current tax year, 2020-2021, ends on April 5, and the new tax year, 2021-2022, begins on April 6. Many other nations have tax years that correspond to the calendar year. However, in the United Kingdom, our tax year begins and ends in the middle of the calendar year for historical purposes.

In 2021/2022, how much will I earn tax-free?

From April 2021, the tax-free personal allowance (the amount you will receive before paying taxes) will increase as expected. You could have earned £12,500 in the previous year before paying tax. This will increase to £12,570 for basic rate taxpayers in the tax year 2021/2022.

If you receive more than £12,570, you will be subject to a 20% tax rate. Higher-rate taxpayers will not have to start paying 40% tax until they earn £50,270, up from £50,001 the previous year. Basic-rate taxpayers (those earning between £12,501 and £50,000) would gain an additional £14 a year as a result of the change. Meanwhile, higher-rate taxpayers would receive a wage increase of up to £68 per year.

Any earnings above the personal tax limit are subject to income tax. You must pay more tax if you earn more income. The following are the current income tax brackets for 2021/2022:

  • £12,570 Personal Allowance £12,500
  • 20 percent basic rate £12,571 to £50,270
  • 40 percent higher rate £50,271 and £150,000
  • Over £150,000, there is an additional rate of 45 percent.

These thresholds, however, will be frozen until 2026, according to Chancellor Rishi Sunak's Budget.

What do you do if you've recently become self-employed?

It's a common misconception that if you make less than the tax-free threshold, HMRC doesn't need to know. This isn't true. You must notify HMRC if you receive more than £1,000 a year. If you earn less than £1,000 in income, you may be eligible to claim the HMRC Trading Allowance meaning you don’t need to register and tell HMRC about your income.

When the new tax year begins on April 6, HMRC will send you a reminder about filing a tax return for the previous year, i.e. 2020/2021.

If you've recently become self-employed, you'll need to register with HMRC for tax and National Insurance in order to receive your notice. You can do this by registering online at GOV.UK, filling out an online form CWF1, calling the HMRC helpline for newly self-employed people, or filling out an on-screen form before printing it and mailing it to HMRC.

If you receive Marriage Allowance or Blind Person's Allowance, your Personal Allowance could be higher. If you earn more than £100,000, it'll be lower.

Please contact Persona Finance ( if you have any further questions or would like to have a consultation. Our accountants are here to give advice on your personal finances and to prepare self-assessments.

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