Budget 2021: Tax Changes For The Year Ahead

The Budget 2021 was, as ever, extremely important in outlining the tax changes for the coming year.

While the announcement centred around the coronavirus support, there was lots of other information of which business owners should not overlook.

Here’s our summary of the key Budget points that you may have missed.

Income Tax & Personal Allowances

The government had promised to not increase income tax rates, and they stuck by that promise.

They did increase the personal tax allowance to £12,570 for the 2021/2022 tax year, but we should not expect this to change anytime soon…

This figure has been frozen until at least April 2026. The basic rate band (£37,700) and the higher rate threshold (£50,270) have also been frozen.

The National Insurance Upper Earning and Profits threshold (£50,271) has also been frozen for the next 5 years.

Corporation Tax Rises

From April 23rd corporation tax will increase to 25%. However, companies that have profits below £50,000 will retain the 19% corporation tax rate. 

In order to not create a huge increase, any company whose profits are above £50,000 but below £250,000 then there will be marginal relief available.

Self-Employed Traders

If you are Self-employed and received grants under the SEISS on, or after April 6th 2021, then this amount will be taxable in the year of receipt – instead of solely in 2020/21.

For any working household who received Covid-19 support, via Working Tax Credits, then you’ll be glad to hear that these payments will be tax exempt.

Benefits-In-Kind & Expenses

For any bicycle that has been purchased for an employee – the rules will be eased, meaning that the equipment doesn’t have to be mainly used on journeys relating to work.

This will only apply to equipment provided on, or before, 20th December 2020.

The exemption for Covid-19 related home office expenses is extended for 2021/22. This includes purchases to allow employees to work from home.

VAT & Making Tax Digital

The VAT registration threshold will be frozen for 2 years.

In regards to the Making Tax Digital for VAT switch: this will be extended to all registered businesses from 1st April 2022.

Capital Gains Tax

There have also been freezes to the Capital Gains Tax annual exemption, Inheritance Tax nil-rate band, residence nil rate band, and the pensions standard lifetime allowance.

Social Investment Tax Relief has been extended until at least April 2023.


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