Income Tax measures
The personal allowance increases to £12,570 from April 2021, but is then frozen until April 2026.
The basic rate band increases to £37,700 from April 2021 (BR band effectively to £50,270), and then frozen until April 2026.
There are no immediate changes to the rates of tax, being 20%, 40%, and 45%.
We’ve also not spotted any changes to savings or dividend tax rates for the 2021/22 tax year.
Car and van benefits are as previously announced.
National Insurance
As previously announced, the LEL will be £520pcm, the PT £797pcm, the ST £737pcm and the upper limits align with the top of the basic rate band.
As such, Director salaries for 2021/22:
-1 Director company: £737.00 gross per month (up from £732 pcm)
-Multiple Director/1 Director and employee(s): £797 gross per month (up from £790pcm)
Capital Gains Tax measures
The Annual exemption will be frozen at £12,300 until April 2026.
Inheritance Tax and Pension Lifetime limits
These are frozen until April 2026.
Off-payrolling
No changes, so coming in from April 2021.
VAT
The registration and deregistration limits are frozen for 2 additional years.
MTD: Over the coming years more VAT registered businesses are falling under the scope – and need to keep digital records more swiftly. Do we need another push on this?
HMRC Compliance Team
A 1200+ Team of HMRC investigators has been brought together to tackle C-19 related fraud, focusing on furlough, SE: ISS and Government backed loans.
Corporation Tax
The 19% rate remains until 31st March 2023, then it will be:
Profits up to £50,000: 19%
Profits over £250,000: 25%
Profits between £50k and £250k: Tapered from 19% to 25% (details to follow)
This looks to be a 0.3% increase in rate per £10,000 over the £50k, though HMRC are likely to find a convoluted manner to calculate it.
This will also mean the return of the Associated Company rules, rather than the 51% group structures, and I am sure that they will find out their old guidance from a few years back and give it a polish in the next year or so.
Trading losses carry back
The rules will be extended to allow a 3-year carry-back provision (rather than 1 year) for the 2020/21 and 2021/22 tax years for both incorporated and unincorporated businesses.
Annual Investment Allowance
As previously announced the 1-year extension to the £1,000,000 level continues to 31st December 2021.
Super deductions for Corporation Tax
To try to stop large companies from holding on to their cash until the 25% tax rate kicks in, there is a 2-year period of a 130% super deduction, from April 2021, for most new plant and machinery (18% pool). Those with huge plant and machinery expenditure where the AIA is insufficient will benefit from this most.
They are also offering a 50% first year allowance on new items that would normally be in the special rate pool (6%).
This is likely to impact a nominal number of our clients. The Chancellor took pains to confirm that this would not have been available while we were in the EU.
COVID-19 support
Stamp duty land tax
The £500k ‘nil rate’ band continues to 30th June 2021
It will then become £250k to 30th September 2021
And reverts to £125k from 1st October 2021
The 3% for second homes, corporate purchases still applies.
Furlough
As previously reported, it is extending to the end of September 2021 at 80%.
For July 2021, the employer will contribute 10%.
For August and September 2021, the employer will contribute 20%.
SE:ISS
The fourth grant will be claimable from late April 2021 – and based on the guidance, it will be taxable in the 2021/22 tax year.
The fifth grant will be claimable from July 2021 and will be at 2 levels depending on the reduction to your turnover – either the full one at 80% or a reduced one at 30%.
More guidance is expected on these throughout the coming months, but the Chancellor confirmed that the 2019/20 Tax Returns will be brought into account for these.
Restart grant
New business rates based grants are to be brought in from April, with non-essential retail businesses to get up to £6k and gym/personal care and hospitality/leisure up to £18k.
Loans
When the BBL/CBILS come to an end, they are bringing out a Recovery Loan Scheme where only 80% of the loan will be supported by HM Government. These will be available until December 2021 and can be between £25k and £10m. These will be open to all businesses, including those who have existing C-19 loans.
Business rates holiday
Extended in full to 30th June 2021 for eligible retail, hospitality and leisure properties in England and then discounted (66% relief for businesses required to be closed on 5th January 2021) for some businesses for the rest of the year.
VAT for hospitality
The 5% rate of VAT will continue to 30th September 2021.It will then increase to 12.5% until 31st March 2022. Before reverting to 20%.
Other news
Bolton: Bolton is one of the towns to benefit from the Government additional support.
Mortgage support: Allowing buyers access to a 5% deposit mortgage backed by HM Government up to a maximum of £600,000. This will be available for new mortgages from April 2021 to December 2022. The interest rate can be fixed for 5-years too.
Duties: Fuel and booze frozen again – Woo Hoo!
Help to grow: The Government is to help with funding training to upskill workplaces, in such things as executive and digital training. Seemingly 90% support from HM Government.
Cycle to work: The requirement to use the bike for mostly work journeys is relaxed until April 2022, given the needs to work from home etc.
Freeports: Multiple new sites in the UK. If we have clients working on these, or investing then there are some additional first year allowances, which we can look at as required.
Consultations: R&D and EIS – again mentioning that we can do this after leaving the EU!
ISA limit – adult: Unchanged.
Thanks for reading,
Your friendly neighbourhood Tax Team