Personal Tax

The government has announced to increase the personal allowance and basic rate limit in accordance with Consumer Prices Index for 2021 to 2022. The CPI for march 2021 was 109.4, so the personal allowance will be increased to £12,570, whereas the basic rate limits will be increased to £37,700 for 2021 to 2022. These rates will remain the same for the years 2022 to 2026.

For 2020 to 2021 tax rate are as follows:

Basic rate

20%, £12,571 to £50,270

Higher rate

40%, £50,271 to £150,000

Additional tax

45%, above £150,000

Capital gains tax

The government has amended the anti-avoidance rule in Finance Bill 2021 to make sure it works as intended when claiming reliefs on gifted business assets. This amendment will apply to any disposal made on or after 6 April 2021, whereas no changes were made in capital gains tax.

For more information, please visit GOV.UK website.

Corporation tax

The government has made no changes in corporate tax for the year 2020 to 2021. However, it has announced a 25% increase in Corporation Tax’s main rate for the financial year beginning from 1 April 2023.

Corporation tax rates for the financial year 2023 are:

  • 25%, £250,000
  • 19%, £50,000 or less

Main rate reduced by a marginal relief, profits between £50,000 and £250,000.

R&D tax relief for SMEs

The law concerning R&D tax reliefs and the R&D tax credit is amended to prevent its abuse. The R&D tax credit provides valuable support by allowing the companies to claim 14.5% of their losses. However, to prevent any abuse, the R&D credit that can be claimed is limited to £20,00 plus 300% of its PAYE and NIC for the given period. The amendment will be in effect on and after 1 April 2021.

VAT Deferral New Payment Scheme

The businesses which opt for the VAT deferral payment scheme introduced in response to the COVID-19 pandemic, but couldn’t pay VAT returns due between 20 March 2020 and 30 June 2020, can now pay the VAT due in installments. You can join the new payment scheme by 21 June 2021.

The maximum number of installments available to you depends on the date you joined the scheme.

  • By 19 March 2021, 11 installments
  • By 21 April 2021, 10 installments
  • By 19 May 2021, 9 installments
  • By 19 June 2021, 8 installments

Property tax

In response to COVOD-19 government has announced to extend the stamp duty holiday on house purchases in Northern Ireland and England. According to this initiative, there will be no tax on sales of properties less than £500,000 until 30 June 2021. Also, there will be no tax on properties under £250,000 until 30 September 2021.

VAT reverse charge on CIS

The VAT reverse charge system is introduced to reduce fraud by subcontractors. Under this system, sub-contractor cannot charge or receive VAT as a source of income. In this system, subcontractors have to show but cannot charge the VAT on their invoices to the contractors. The contractor will be liable to pay the VAT to HMRC. This system will be applicable from 1st March 2021.

IR35 Rules

The government has updated the IR35 rules, now limited companies working for a large client will not be responsible for filing self-assessment rather the client will be responsible for reporting the tax statement to HMRC. It also implements the tax rules applicable to you depends on how your client views your status. However, the client shall inform you about your tax status, like if he considers you self-employed or not while filing for your tax. These new IR35 rules are applicable from April 2021.

Author

Ishfaq Shah

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