The personal allowance and basic rate limit will be maintained at the 2021/22 level up to and including 2025/26. It will set the personal allowance at £12,570 and the basic rate limit at £37,700 for tax years:
2022 to 2023
2023 to 2024
2024 to 2025
2025 to 2026
The higher rate threshold (the personal allowance added to the basic rate limit) will be £50,270 for these years. The National Insurance contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years. From 2026 to 2027 onwards, existing legislation means the default is for the Personal Allowance and basic rate limit to be indexed with Consumer Price Index (CPI).
From 1 April 2023, the Corporation Tax main rate for non-ring fenced profits will be increased to 25% applying to profits over £250,000. A small profits rate (SPR) will also be introduced for companies with profits of £50,000 or less so that they will continue to pay Corporation Tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
As a temporary measure from 1 April 2021 to 31 March 2023, a “super deduction” of 130% will apply to capital expenditure that would normally qualify for 18% main writing down allowance. under normal circumstances.
In addition, a first year allowance of 50% on capital expenditure that would normally qualify for 6% writing down allowance
Annual Investment Allowance
Temporary increase in Annual investment allowance (AIA) from £200,000 to £1,000,000 on plant & machinery on expenditure incurred in the period from 1 January to 31 December 2021.
Carry Back of Losses
To be extended from 1 year to 3 years.
VAT taxable turnover threshold for registration will remain at £85,000 until 31 March 2024.
Deregistration threshold to remain at £83,000 up until the same date.
At present businesses registered for VAT with turnover below £85,000 are not required to operate Making Tax Digital (MTD). From April 2022, all businesses registered for VAT will be required to file using MTD,
The temporary vat reduced rate for hospitality, holiday accommodation and attractions of 5% to be extended to 30 September 2021. A new 12.5% rate to apply from 1 October 2021 until 31 March 2022.
Benefit changes for van and fuel benefit for cars and vans
The van benefit charge and the car and van fuel benefit charges will increase from 6 April 2021. The flat-rate van benefit charge will increase to £3,500; the multiplier for the car fuel benefit will increase to £24,600; and the flat-rate van fuel benefit charge will increase to £669.
Interest harmonisation and penalties for late payment and submission
Introduction of a new points based regime for regular tax submissions, which replaces existing penalties for VAT and ITSA.
There is no penalty if the taxpayer pays the tax late but within 15 days of the due date.
The first penalty is set at 2% of the outstanding amount if they pay between 16 days and 30 days after the due date.
It is set at 4% of the outstanding amount if there is tax left unpaid 30 days after the due date.
A second late payment penalty is charged at a rate of 4% per annum, calculated on a daily basis on the total unpaid tax incurred from day 31.
To avoid a penalty or penalties, the taxpayer will need to either pay or approach HMRC to agree a Time to Pay Arrangement.
The VAT interest rules will change and will be similar to those that currently exist in Income tax self assessment. The changes will effect interest payments for as follows:-
when an amount is not paid by the due date, late payment interest will be charged to the taxpayer from the date that payment was due, until the date the payment is received
HMRC will pay repayment interest on any overpaid tax and/or tax refunds due to be repaid.
The IHT thresholds are to be frozen at their 2020 to 2021 levels up to and including 2025 to 2026. This measure will: maintain the Nil rate band at £325,000; maintain the Residence nil rate band at £175,000; and, maintain the Residence nil rate band taper, starting at £2 million.
Capital Gains Tax
Threshold to be maintained at£12,300 for individuals and personal representatives at £6,150 for the years 2021/2022 to 2025/2026.
Employment allowance remains at £4000 per annum.
The lower earnings limit will remain at £120 per week (£520 per month, £6,240 per year). Both the primary and secondary thresholds will increase by £1 per week.
For 2021/22, the primary threshold is set at £184 per week (£797 per month, £9,568 per year), while the secondary threshold is set at £170 per week (£737 per month, £8,840 per year).
National Minimum Wage and National Living Wage rates
The table below gives the current rates and those applicable from April 2021.
|Year||25 and over||21 to 24||18 to 20||Under 18||Apprentice|
|April 2020 (current rate)||£8.72||£8.20||£6.45||£4.55||£4.15|
|Year||23 and over||21 to 22||18 to 20||Under 18||Apprentice|
This measure will apply to engagements with medium or large-sized client organisations in the private and voluntary sectors. It will shift responsibility for operating the off-payroll working rules from the individual’s PSC, to the client organisation or business to which the individual is supplying their services.
This includes responsibility for deciding whether the rules should apply and ensuring that the associated employment taxes and NICs are deducted, where appropriate. Public sector client organisations who are already responsible for deciding whether the rules apply will be affected by some new requirements, such as issuing a Status Determination Statement, which should include the reasons for the status decision.
Engagements with small client organisations outside the public sector are exempt, minimising administrative burdens for the vast majority of businesses.
A 5% allowance is currently available to PSCs to reflect the costs of administering the off-payroll working rules. Because responsibility is shifting from the PSC to the organisation receiving the individual’s services, this allowance will be removed from 6 April 2021 for those engagements with medium and large-sized organisations in the private and voluntary sectors.
The allowance will continue to be available to PSCs for engagements with small organisations outside the public sector.
Our offices remain open but with reduced staffing levels. Due to government guidelines, some of our staff remain working from home. Even with these restrictions, we believe we can continue to offer the same service we have provided in the past.
To protect you and our staff, until further notice, we are not allowing access to the building other than our own staff or emergencies. This means we are not currently able to offer face to face client interviews in the office so you may find you are either emailed or telephoned in order to discuss matters arising.
When dropping off and picking up records, we will ask you to remain outside whilst the door is answered by a member of staff.
The government have introduced various initiatives to try and help small businesses. Please see below for the latest information on help for small businesses.
- If you have submitted all Tax Returns to 2019 you will be eligible for a taxable grant of 80% of 3 years taxable income to that date. Income will be averaged over shorter periods if 3 years are not available. The maximum grant is £2500 pcm.
- If you have other income, your self employed income must make up 50% of your total to claim.
- If you did not submit your 2019 return by 23 April 2020 you will not be entitled to a grant.
- If you commenced self employment after 5 April 2019, no grant is available. However, we recommend new clients complete their 2020 returns as soon as they are able because that could form the basis of negotiating a claim with HMRC.
- If your taxable income exceeds £50K no grant will be due
- You need to use your own personal tax account in order to make a claim. We are unable to make the claim on your behalf.
- It has recently been announced that taxpayers with up to £30,000 of self-assessment liabilities due on 31 January 2021, whether deferred from July 2020 or otherwise, can arrange a 12 monthly instalment plan under time to pay arrangements. In effect the final payment will not be due until January 2022. Unlike the postponement from July 2020, If advantage is taken of this arrangement, interest will be accruing from 1 February 2021 on amounts paid after this date.
- If you are VAT registered see below
- Loans – these are covered in the limited companies section.
- Unlike the self employed there is no grant scheme available based on taxable profits
- Certain loans are available, you will need to contact your bank, which are underwritten by HM Government. However, it is the bank who are being underwritten and not your business. We understand banks are under instructions not to ask for personal guarantees for loans up to £250,000. You should take legal advice before signing any guarantee if you think you need a loan.
- Loans will depend upon the viability of your business, involve the preparation and submission of management information etc at a time when funds are tight. We do not expect many clients to be able to apply for these.
- There are grants for smaller businesses, especially if you trade in retail, leisure or hospitality sectors and have property on which business rates are levied. Local authorities should be writing to you. For rateable values up to £15,000 the grant is £10,000; for larger RV’s up to £50,000 the loan is £25,000.
- Any dividends you pay yourself or fellow shareholders are not covered but see below for furloughed employees.
- Submission of accounts to Companies House were automatically delayed by 3 months for accounts years ending up 30 June 2020 Thereafter, the usual 9 months returns. Please note that any Corporation tax remains due nine months and one day after the accounting period. However, we understand HMRC will look sympathetically at any claims.
- The IR35 rules due to commence in April 2020 are delayed for 12 months.
Employees of Self Employed or Companies
- The employee retention scheme is due to finish on 31 October 2020.
- Under the scheme, employers could reduce gross pay by up to 20% when paying furloughed employees. Thus, effectively, HMRC reimbursed all net wages paid plus 80% of Employers NIC and their statutory Workplace pension contribution.
- From 1 September 2020 the percentage reimbursed by HMRC reduced to 70% and then down to 60% from 1 October 2020.
Working From Home Allowance
On 1 October, HMRC set up a new online portal which allows workers to claim tax relief for working at home. The service has been set up to process tax relief on additional expenses for employed workers who have been told to work from home by their employer to help curb the spread of Covid-19.
Since 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home, eligible taxpayers can claim tax relief based on the rate at which they pay tax.
The government stated as an example that “if an employed worker pays the 20% basic rate of tax and claims tax relief on £6 a week, they would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills”.
- Business rates for some were postponed for a year. Local authorities should have contacted those eligible.
- Job retention bonus – This a one-off taxable payment to employers, for each eligible employee furloughed and kept continuously employed until 31 January 2021. The bonus is claimable between 15 February 2021 and 31 March 2021.
- VAT Help –
- No Vat that is due for the period from 20 March 2020 to 30 June 2020 needed to be paid to HMRC at that time. At present we understand any VAT postponed will be due before 5 April 2021.
- Any return due during the period had to be submitted as normal.
Construction Industry & VAT
A massive change has taken place with regard to how VAT is collected and accounted for. A reverse charge will affect supplies of building and construction services subject to the CIS scheme involving labour, or materials and labour, at the standard or reduced VAT rates.
If a contractor receives a service subject to the VAT reverse charge from it’s subcontractor, it must account for the VAT in box 1 of it’s VAT return and also recover it simultaneously on the same return in box 4, subject to the normal rules for input tax deduction. The subcontractor will no longer be required to charge VAT but will in future inform the contractor of the amount of the VAT reverse charge applicable. The subcontractor will also inform the contractor that the invoice is subject to the reverse charge and that the contractor is required to account for the VAT. The final contractor in the chain will be required to account for and pay VAT on their service.
If you are affected by the reverse charge scheme you will need to keep separate records. We have prepared pro forma spreadsheets to assist you if required. Please contact us if you wish to take advantage of these or if you require further details on your future responsibilities.
Please follow the links below for the HMRC flowcharts showing the steps to be taken by both suppliers and buyers
Making Tax Digital for VAT
Businesses whose taxable turnover exceeds the VAT registration threshold will need to keep their records digitally, using Making Tax Digital (MTD) functional compatible software, and create the VAT return from that (or a combination of) software, for return periods starting on or after 1 April 2019.
Digital records must be maintained in what is defined as “functional compatible software” i.e. software or spreadsheets (or combination of both), which will connect to HMRC via an Application Programming Interface (API). These records must be digitally maintained for 6 years.
Changes to VAT Return Submission
VAT returns must be submitted to HMRC by means of a business’s functional compatible software communication digitally via HMRC’s API platform. Businesses will no longer be able to manually enter figures onto the HMRC portal.
“Soft Landing Period”
For VAT return periods commencing between 1 April 2019 and 31 March 2020, HMRC will not enforce the requirements to have digital links between software programmes. This is known as the “soft landing period”. After this period, all transfers of data between digital records must be transferred digitally.
There is no “soft landing period” for the digital submission of the VAT return.
Submission of VAT Returns under MTD
We have obtained VAT filing software that enables us to file VAT returns online. If you are unable to file using an API, we will be able to do so on your behalf, should you wish to use this service.
National Insurance and the Higher Income Child Benefit Charge (HICBC)
Higher rate tax payers should beware that failure to claim the HICBC could result in the spouse not obtaining child benefit credits. It may well be beneficial to claim the benefit but to elect not to receive the payments.
Please contact us if you wish to discuss further.