What's changing for your small business clients in the 2021/22 tax year?

30th Mar 2021
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A new tax year is starting on 6th April, which means many of the changes announced in recent Budgets will come into effect. Before the 2021/22 tax year kicks off, award-winning accounting software provider FreeAgent has compiled a handy roundup of the key changes for your small business clients.

What's changing for your small business clients in the 2021/22 tax year?

Construction Industry Scheme (CIS) updates

If any of your clients are VAT-registered subcontractors in the building and construction industries, the domestic VAT reverse charge legislation has changed how your clients apply the reverse charge to their CIS invoices for VAT-registered contractor customers.

IR35 changes in the private sector

If any of your contractor clients work with large or medium-sized businesses in the private sector, your client’s customer will need to decide whether the work your client does for them falls within IR35 from 6th April 2021. If it does fall within IR35, your client’s customer will have to collect tax and NI from the money they pay your client.

Tax and National Insurance rates and bands

Here are the changes that will come into effect in April 2021:

National Minimum Wage and National Living Wage 

Changes will come into effect on 1st April. Note the different age bands for 2021/22.

  2021/22 2020/21
Employees aged under 18: NMW £4.62 £4.55
Employees aged 18-20: NMW £6.56 £6.45
Employees aged 23 and over: NLW £8.91 N/A
Employees aged 25 and over: NLW N/A £8.72

Employees aged 21-24: NMW

N/A £8.20
Employees aged 21-22: NMW £8.36 N/A

England, Northern Ireland and Wales

Changes will come into effect on 6th April 2021.

  2021/22 2020/21
Personal allowance £12,570 £12,500
Employee’s NI becomes due at £9,568 £9,500
Employer’s NI becomes due at £8,840 £8,788
Higher rate tax becomes due at £50,270

£50,000

Class 2 NI becomes due when profits exceed £6,515 £6,475
Class 2 NI per week £3.05 £3.05
Class 4 NI becomes due when profits exceed £9,568 £9,500

Scottish Tax Rates and Bands

Changes will come into effect on 6th April 2021.

  2021/22 2020/21
Personal allowance £0 - £12,570 £0 - £12,500
Starter rate 19% £12,571 - £14,667 £12,501 - £14,585
Basic rate 20% £14,668 - £25,296 £14,586 - £25,158
Intermediate rate 21% £25,297 - £43,662 £25,159 - £43,430
Higher rate 41% £43,663 - £150,000 £43,431 - £150,000
Top rate 46% Over £150,000 Over £150,000

Student Loan repayment thresholds

Changes will come into effect on 6th April 2021.

  2021/22 2020/21
Undergraduate loan: plan 1 £19,895 £19,390
Undergraduate loan: plan 2 £27,295 £26,575
Scottish student loan: plan 4 £25,000 N/A
Postgraduate loan £21,000 £21,000

 

Find out how FreeAgent can help you work together with your small business clients.