What's Changing in the New Tax Year 2021?
Are you ready for the changes?
Our accountants are already getting ahead of the curve with our real-time compliant software.
Is your software agile enough to roll with the punches?
We'll help you keep moving with the changes by giving you the tools and software you need to comply now and in the future.
Book a demo with us today to protect and future-proof your practice now.
The new tax year starts today 6 April 2021, with it comes major changes. Here are the key changes you need to know.
VAT rates for 2021/22
VAT rates will not change, exemptions however apply to coronavirus relief measures. The VAT threshold will not change from £85,000 it's currently set at. This will remain until April 1 2024 government says.
Wage and salary changes for 2021
Minimum wage amounts, personal tax, and National Insurance allowances have increased for 2021. A recent addition to the 2021/22 tax year is National Living Wage is now extended to 23 and 24-year-olds for the first time, having previously been limited to those aged and older.
There are process changes in how medium and large businesses are to handle the tax affairs of contractors who work for them. As of April 6, 2021, medium and large businesses must determine if the IR35 applies to contractors they hire. If so they are required to pay a Deemed Employment Payment.
Brexit tax changes for 2021/22
Brexit legislation doesn't directly impact any other kind of business tax.
Coronavirus tax measures for 2021/22
The hospitality sector VAT rate which was reduced to 5% in July 2020 has been extended to 30 September 2021. Subsequently, a new 12.5% rate will be applied until 31 March 2022. The 20% rate will resume from 1 April 2022. Flat rate VAT users in the hospitality sector also benefit further from these changes.
Catering services: 4.5% until 30 September 2021, and 8.5% following this until 31 March 2022.
Hotel and accommodation: 0% until 30 September 2021, and 5.5% following this until 31 March 2022.
Pubs: 1% until 30 September 2021m and 4% following this until 31 March 2022.
Corporation tax and capital allowance changes for 2021/22
There's no increase in corporation tax for the 2021/2022 tax year, this also applies to the 2022/23 tax year.
There are major changes in April 2023, when corporation tax rises to 25% on profits over what will then be referred to as an Upper Profits Threshold of £250,000.
Additional tax changes in 2021
There will be a 'five-year freeze' for further tax changes. The changes to tax bands announced for 2021/22 will continue in force up to and including 2025/26. The personal allowance for income tax will increase to £12,570 for 2021/22 - equivalent to £242 per week and £1,048 per month.
The basic rate band widened by 0.53% in 2021/22, rising from £37,500 to £37,700, where it will remain until 2025/26.
The top rate threshold for England and all three devolved tax regimes will remain frozen at £150,000.