New tax year and budget update for 2021-2022

The chancellor, Rishi Sunak, has delivered his spring 2021 budget, and while there wasn’t much news (either good or bad) for pension providers, the chancellor also announced that the Coronavirus Job Retention Scheme (CJRS) has been extended until 30 September 2021.

Employers will continue to be responsible for National Insurance (NI) contributions and pension contributions during that time. Remember, The Pensions Regulator’s (TPR’s) deadline for the late reporting of contributions has reverted to 90 days, following last year’s extension to 150 days.

Reminder for the new tax year

We’ve also put together a quick reminder of what the new tax year means for employers and employees in terms of auto enrolment into a workplace pension. If you’re an employer, you’ll need to make sure your payroll software updates are in place in time for this – including pay week 53.

The three key factors are:

Trigger for auto enrolment

This trigger decides who’s automatically enrolled into a workplace pension. For the tax year 2021-2022 this will remain the same at £10,000. This is the minimum amount that someone needs to earn each year to qualify. However, this year, the upper limit has increased from £50,000 to £50,270.

We’ve set out the amounts for each pay period below:

2020-21AnnualOne weekFortnightFour weeksOne monthOne quarterBi-annual
Earnings trigger for automatic enrolment£10,000£192  £384  £768  £833  £2,499  £4,998  

The Department for Work and Pensions’ (DWP)’s annual review of the automatic enrolment trigger and qualifying earnings for 2021-22 concluded that the current threshold for automatic enrolment should stay the same. This means there won’t be many new savers drawn into workplace pension saving this year.  

Qualifying earnings band stays the same

This is the amount that employers use to calculate pension contributions. For 2021-22, the lower limit of the qualifying earnings band will remain at £6,240 following last year’s increase. This means the first £6,240 of an individual’s earnings don’t count towards auto enrolment contributions if you use qualifying earnings as the basis of your contribution calculations.

So, if an individual earns £20,000 a year, the amount their employer would calculate their qualifying earnings on would be £13,760. (£20,000 – £6,240 = £13,760)

This is also known as pensionable earnings and it’s calculated using the following method:

Income (£20,000) minus lower limit of the qualifying earnings band (£6,240) equals pensionable earnings (£13,760).

We’ve set out the different amounts for each pay period below:

2021-2022AnnualOne weekFortnightFour weeksOne monthOne quarterBi-annual
Lower level of qualifying earnings£6,240£120£240£480£520£1,560£3,210
Upper level of qualifying earnings£50,270£967£1,934£3,867£4,189£12,568  £25,135

In another boost for employees, some employers are choosing to pay more than the minimum contributions – 3% for employers and 5% for employees – which have been set by the DWP.

The lifetime allowance stays the same

The lifetime allowance is the total amount of pension savings you can take when you retire without having to pay extra tax.

It applies to the money in all your workplace pensions, including our Scheme, and any personal pensions you’ve got, but not your State Pension. The lifetime allowance is £1,073,100 and will be frozen until 2026.

This information doesn’t constitute financial or professional advice and is general in nature. For free and impartial guidance about your pension savings, please visit or call:

  1. Pension Wise (0800 138 3944) to book a phone or face-to-face appointment.
  2. Citizens Advice Bureau (CAB) (03444 111 445) for a face-to-face appointment.
  3. Pension Advisory Service (0300 011 3797).

These services offer free information, but not advice.

Checking for pay week 53 on 5 April

Pay period 53 takes place when there are 53 weekly pay days in the year. The extra pay run is commonly known as a week 53. If you pay your employees weekly, two weekly or four weekly on Monday 5 April 2021, you’ll have an extra pay run at the end of the 2020-21 tax year.

If you pay your employees monthly, you won’t have a week 53.

You can find out more about how to process payroll for pay week 53 here.

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