New tax year: A guide to changes in UK finances in 2021

This guide provides an overview of the key finance changes that come with the new tax year. Read on to find out how they could affect you.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Full length shot of a happy senior couple drinking coffee and spending time together at home

Image source: Getty Images

The new tax year is upon us, and with it comes a wave of changes to UK finances and the tax system. Below is a comprehensive guide to everything that’s changing and how it could affect you.


5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Tax allowance

This new tax year, the personal allowance, which is the annual amount of income you can earn without having to pay tax, is rising by 0.5% from £12,500 to £12,570.

Meanwhile, the threshold for paying the higher rate of income tax increases from the current £50,000 to £50,270 a year. These rates are expected to be frozen for the next five years.

Investors should also note that the annual ISA allowance will remain at the current £20,000 limit this tax year.

And like the personal allowance, there are rumours that it could also be frozen for the next five years, which makes it especially important to make sure that you’re using up your full allowance and therefore maximising your savings through one of our top-rated stocks and shares ISAs.

State Pension

In line with the triple lock mechanism, the UK State Pension is increasing by 2.5% this tax year.

Those who receive the full new State Pension will now get £179.60 a week, up from £175.20, or an extra £4.40 a week. Those eligible for the basic State Pension will get £137.65 a week, up from £134.25 which is an increase of £3.40.

Universal Credit

On top of the £20 a week uplift which has been confirmed to continue until September 2021, Universal Credit is rising.

Here is a comparison of previous Universal Credit monthly standard allowances with what you will be entitled to this tax year.


Allowances to April 2021 (without the £20 uplift)

Allowances to April 2021 (with the £20 uplift)

New allowances for April 2021 to Sept 2021 (with the £20 uplift)

New allowances for Oct 2021 to Mar 2022 (after the end of the £20 uplift)

Under 25 and single





25 or over and single





Joint claimants both under 25





Joint claimants, one or both 25 or over





Claimants caring for a disabled person will also see their monthly boost increase from £162.92 to £163.73 this tax year.

Child Benefit

Child Benefit is increasing from £21.05 to £21.15 a week for the first child and from £13.95 to £14 a week for subsequent children in this new tax year.

Working Tax Credits

The £80 a month Working Tax Credit uplift is coming to an end. Households who have been receiving this benefit will instead get equivalent support in the form of a one-off payment of £500.

If you are eligible, you should get the payment by 23 April 2021. You do not need to apply for it. HMRC will contact you to confirm your eligibility.


Pension Credit

This benefit is available to people over State Pension age on a low income. It tops up your weekly pension payment to £173.75. This figure is rising to £177.10. You could also get extra help if you are carer, severely disabled or responsible for a child or a young person.

Statutory Sick Pay

Statutory Sick Pay rates are also changing this new tax year. While the minimum amount you need to earn still remains at £120 a week, your payments will now rise to £96.35 a week.

Housing Benefit

As of 6 April, Housing Benefit has increased from £58.90 to £59.20 a week for those under the age of 25, and from £74.35 to £74.70 a week for those over the age of 25.

Personal Independence Payments (PIP)

Personal independence payments are rising from £89.15 to £89.60 a week for enhanced claimants this new tax year. Standard claimants will see their PIP rise from £59.70 to £60 a week. The mobility component of PIP is also rising from £62.25 to £62.55 a week for enhanced payments and from £23.60 to £23.70 a week for standard payments.

Disability Living Allowance

The maximum amount of disability living allowance you can claim is increasing from £89.15 to £89.60 a week. The lowest amount has risen from £23.60 to £23.70 a week while the middle amount has risen from £59.70 to £60.00 a week.

Parental Pay

The rate of pay for maternity, paternity, adoption and shared parental pay is also going up this tax year from £151.20 to £151.97 a week.

New government-guaranteed mortgages

During the pandemic, 95% mortgages have pretty much disappeared from the market. They are set to come back this tax year (from 19 April) after the chancellor launched a mortgage guarantee scheme.

The scheme helps buyers to purchase a property with just a 5% deposit, with the government guaranteeing the rest up to a maximum of £600,000. The likes of Barclays, Lloyds, Santander and HSBC have already announced that they will be offering these mortgages.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

More on Uncategorized

Light bulb with jester hat perched on top

New look. Same Foolish investing.

Maybe you already noticed — things are looking a little different around here. At the top corner of our site,…

Read more »

Light bulb with jester hat perched on top

We have some exciting news!

You could even say it’s 25 years in the making...

Read more »


Tesco PLC Is Doing All The Right Things And I’m A Buyer

I’m a big fan of how Tesco PLC (LON: TSCO) is turning itself around and here’s why…

Read more »


What’s Stopped Me From Buying Gulf Keystone Petroleum plc Today

Royston Wild considers the investment case for Gulf Keystone Petroleum plc (LON: GKP).

Read more »


Dow Futures Fall Ahead Of Durable Goods Report

Stock index futures ahead of this morning's durable goods orders report indicate that the Dow Jones and S&P 500 may…

Read more »


What’s Stopped Me From Buying BHP Billiton plc Today

Royston Wild considers the investment case for BHP Billiton plc (LON: BLT).

Read more »


3 FTSE Shares Hitting New Highs: National Express Group PLC, Brammer plc and Hilton Food Group plc

National Express Group PLC (LSE: NEX), Brammer plc (LON: BRAM) and Hilton Food Group plc (LON: HFG) set new records.

Read more »


Should I Buy Legal & General Group Plc?

Legal & General Group plc (LON: LGEN) has seen its share price rise 50% in the last 12 months, Harvey…

Read more »