Last month’s Spring Budget 2021 was about extending support to help the UK get through COVID-19, and offering pointers towards the future.
Both the furlough scheme and self-employed income support remain in place until 30 September 2021, while new business loans were revealed.
But in terms of pure tax affairs that affect 2021/22, Chancellor Rishi Sunak told us nothing new – much to our relief after the busiest of tax years.
The personal allowance rises 0.5% from £12,500 to £12,570 for 2021/22 and the higher-rate threshold follows suit, increasing from £50,000 to £50,270.
VAT, corporation tax, dividends, capital gains tax and inheritance tax are all unchanged for the new tax year, which gets under way on 6 April 2021.
That said, there are tax changes to be aware of in 2021/22. Here’s our top five.
1) IR35 extending to the private sector
Changes to the off-payroll working rules – commonly known as IR35 – in the private sector will commence from 6 April 2021. They were due to kick in last April only to be delayed by COVID-19.
Medium and large-sized organisations in the private sector will be responsible for determining if a contractor is inside or outside of IR35. Small organisations are exempt.
HMRC estimates around 80,000 private-sector organisations, including 20,000 recruitment agencies, and around 170,000 contractors will be affected.
2) Business rates
The business rates holiday in England, which had been in place for 12 months, has been extended by a further three months until 30 June 2021.
From 1 July 2021, eligible retail, hospitality and leisure businesses will then pay a third of their normal charge for the rest of the tax year.
A discount of up to £2 million is available to non-essential retail firms that had to shut on 5 January 2021 due to COVID-19 restrictions. Other eligible properties can get a discount of up to £105,000 per business.
The two business rates multipliers have also been frozen for 2021/22.
3) Stamp duty land tax extension
Thousands of home buyers breathed a collective sigh of relief when the stamp duty land tax holiday in England was extended by three months.
Many of those were stuck, through no fault of their own, in complex chains and stood to save up to £15,000 if they completed before 31 March 2021.
Buyers can still purchase a home worth £500,000 or less and pay no stamp duty until 30 June 2021, at which point the tax-free threshold falls to £250,000 until 30 September 2021. From 1 October 2021, it will drop to £125,000.
4) Payroll changes
If you employ any staff within your business, you will probably know the national living wage is increasing to £8.91 an hour on 1 April 2021.
This is the minimum hourly rate that your staff are entitled to, although that depends on their age and whether or not they are an apprentice.
But did you know the age at which you have to pay the national living wage to your staff falls from 25 to 23 at the same time?
Don’t let this catch you out.
5) MTD for VAT: Phase Two
From 1 April 2021, VAT-registered businesses will no longer be able to manually transfer their records between different pieces of software.
The second phase of Making Tax Digital (MTD) for VAT demands VAT-registered firms to use more complex technological solutions that digitally link their records to the software they use to send data to HMRC.
It will still be possible to use spreadsheets in combination with bridging software to do this, but HMRC said users will get “the maximum benefits” by using software that covers the MTD process end-to-end.
HMRC can penalise those businesses for non-compliance, following a soft-landing period in 2020/21.