Following the 2021 budget announcement from the Chancellor of the Exchequer Rishi Sunak, many new tax updates will start to take shape in the everyday lives of the British public. From Income Tax Allowance to Stamp Duty and even Car and Van benefits, the Chancellor ensured that businesses and the British Public were kept front of mind when designing his Budget for 2021. With this insight, we will cover a few key considerations in regards to Tax Rates for 2021/2022, and further information can be found in our 2021/2022 Tax Rates Pocket Guide.
Income tax allowances
The income tax personal allowance and higher rate threshold will be updated in line with CPI as planned in April 2021 and then at that level until April 2026. The standard 20% basic rate of Income Tax threshold will raise by a fraction, coming in at around £12,570 from £12,500 in April 2021, but is planned to remain frozen at this rate until 2026.
Around 1.3 million more people are expected to start paying income tax and around a million more will become higher-rate taxpayers by 2026 following the Chancellors announcement that tax thresholds are to be frozen after a rise this April.
Following this announcement Income Tax Rates are will be important to consider when calculating household income. Taking into consideration devolved tax rates for Scotland and Wales as well as other allowances for other types of incomes, such as BR, HR, and AR taxpayers.
Increases on public allowances
Universal Credit and Child Benefits are to see an increase following the Chancellors announcement. On top of this State Pensions are also due to see an increase in the following year, a welcome change for many.
Individual Savings Accounts (ISAs)
The current rate of £20,000 will remain unchanged going into the next year, as will the monthly and annual contributions limits.
Tax reliefs for individuals
Whilst businesses have received a ‘super deduction’ tax relief when investing in qualifying new plant and machinery between 1 April 2021 and 31 March 2023, there were also several schemes announced to provide income tax relief and capital gains tax breaks for individuals investing in new and growing companies.
The Enterprise Investment Scheme (EIS) is a government-backed initiative offering tax reliefs to investors who buy new shares in qualifying companies. The EIS is designed so that companies can raise money to help grow their business, by offering tax reliefs to individual investors who buy shares in the company.
The Seed Enterprise Investment Scheme (SEIS) offers tax-efficient benefits to investors in return for investments in small and early stages of start-up businesses in the UK. The SEIS was designed to boost economic growth by promoting new enterprise and entrepreneurship in the UK.
A Venture Capital Trust is ideal for keen investors looking for tax reliefs when investing in high-risk funds. As a private investor, when you buy shares in a VCT you gain access to a portfolio of small companies. The Government has a growing interest for experienced investors to be involved in investing in this particular kind of company and announced that they are willing to compensate for this, offering generous tax benefits.
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets. The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.
Corporation tax rates
In his new 2021 Budget, the Chancellor announced an increase in corporation tax rate from April 2023 to 25% on profits of over £250,000. Chancellor Rishi Sunak insisted that although the rate was being increased, the UK will still have the lowest corporation tax rate in the G7.
Other Tax Updates
Both the Capital gains tax (CGT) & Inheritance tax (IHT) have maintained their low band rates, with inheritance tax remaining at a nil-rate until 2026 for sums up to £175,000, and capital gains tax allowance to be frozen until 2026 as well.
Car Benefits For Employees
Mileage Allowance Payments (MAPs) are tax-free payments that an employee can receive from their employer for using their vehicle for business journeys. If the employee receives less than the statutory rate, tax relief can be claimed on the difference. Employees will also have access to car and van benefits, including fuel benefits. These are calculated using the car’s listing price by a percentage linked to the car’s CO2 emissions, and then for fuel benefits, this number is then has a percentage applied using a ‘fuel charge multiplier’. These rates will change within the next year, so employers need to be aware of these charges.
A welcome update – Sunak announced the extension of the stamp duty holiday until June 2021, encouraging ‘generation buy’. On top of this, a new policy for mortgage guarantees to help first-time buyers, providing access to 95% mortgages. The majority of large building banks, including NatWest, Lloyds, Santander, Barclays, and HSBC, will begin offering these mortgages to eligible buyers from next month. The Chancellor has said he is expecting Virgin Money to follow shortly after.
How can Animo help?
For further information on specific rates and charges for each of these categories, as well as key dates for the self-assessment for 2021/2022, information regarding national insurance contributions for 2021/2022 and more, can be found in our 2021/2022 Tax Rates Pocket Guide.
Our expert consultants always welcome the opportunity to support current and prospective clients with their business needs. With comprehensive experience in taxation and ensuring we are always up-to-date with the newest trends and news within the industry, we are well equipped to ensure successful operations. Get in contact with us today by calling +44 (0)207 060 0835, emailing us at firstname.lastname@example.org, or filling in a contact form below!