Recap of 2021 Tax announcements

The government made significant tax announcements as it aimed to reinvigorate the economy in the wake of the COVID-19 pandemic handing out record levels of financial support. 

Covid-19

  • The government’s program of support for businesses included the bounce back loan, recovery scheme loan, Job Retention Scheme, Kickstart Scheme and Self Employment Income Scheme Grants. 
Tax rises in both NICs and dividend tax rates
  • In September 2021 announced a new ‘Social care levy’. It adds 1.5% to the rate of National Insurance and dividend tax from 6 April 2022

Making Tax Digital for Income Tax

  • Tax Basis Year Reform was confirmed. This aims to simplify the Income Tax rules for the self-employed by allocating trading profit to tax years regardless of the business’ accounting period end date. This applies from April 2024 with a transitional period in 2023-24. This will only affect you if you are self-employed with an accounting period that ends on a date other than March 31-5 April.
  • After several postponements, from April 2024: self-employed businesses and landlords with business turnover above £10,000 are required to report under MTD for Income Tax Self Assessment.
Corporation Tax
  • The Chancellor announced an increase in the rate of Corporation Tax from 19% to 25%. Coming into effect in April 2023, this will apply to all companies with profits over £50,000. Company owners should note that this creates an opportunity to review your group structure and associated companies. We can schedule meetings if required to discuss this on a case-by-case basis. 
Stamp Duty Land Tax
  • SDLT residential property rates changed twice: on 1 July and 1 October 2021.
  • First-time buyers’ relief ended on 1 July.
VAT 
  • A domestic reverse charge VAT was introduced on 1 March for business-to-business Construction Industry Scheme supplies.
  • The temporarily reduced rate of VAT for hospitality businesses rose from 5% to 12.5% on 1 September 2021.
Making Tax Digital (MTD) for VAT: new penalties
  • The chancellor confirmed that a new system of late filing and payment penalties will be rolled out for accounting periods beginning on or after 1 April 2022. A points-based late submission penalty regime is replacing existing late submission penalties for VAT and Income Tax Self Assessment (ITSA) under Making Tax Digital.
Off-Payroll Working for private sector
  • The deferred extension of the Off-Payroll Working rules to the private sector commenced on 6 April 2021. 
  • The change in the Off-Payroll Working rules means that payrolling is far more likely to be outsourced and has seen a rapid rise in the number of payroll ‘umbrella’ companies who operate PAYE on agency staff, or on behalf of public sector end clients.
Capital Gains Tax filing deadline

From 27 October 2021,  the CGT filing & payment deadline for UK residential property sales increased from 30 days to 60 days following completion.

Inflation 
  • The UK’s rate of inflation rose to 5.1% in 2021, well ahead of the Bank of England’s headline rate of 2%.
  • Inflation is being fuelled by a combination of different things, including a long period of quantitative easing, combined with global shortages of certain resources across the world and supply chain problems post COVID-19

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