The 2021/22 tax year began on 6 April 2021, so we’ve pulled together a list of all the important tax information for businesses and individuals for the months ahead.
Personal Tax Allowance
Your Personal Allowance is the amount you can earn before you need to pay any Income Tax. The threshold has increased to £12,570 for this tax year, a small increase on last year’s allowance of £12,500. The rate of tax paid at this salary is 20%.
The threshold for Higher Rate income tax at 40% has increased by £270 to £50,270. These thresholds are now frozen until 2026.
What does this mean for Company Directors?
Based on these new thresholds, we recommend a salary of £8,840, with dividends of up to £41,430. This way, you will pay tax at 20% on take-home pay of £47,592.50 – your personal tax bill would be £2,677.50.
The Tax-Free Dividend Allowance for the tax year remains at £2,000. Dividend tax rates have not changed, but the thresholds increased as per the income tax thresholds above.
- Basic-rate taxpayers pay 7.5% on dividends
- Higher-rate taxpayers pay 32.5% on dividends
- Additional-rate taxpayers pay 38.1% on dividends.
For tailored tax advice regarding your small business, just get in touch.
Personal tax relief and allowances
The 0% starting tax rate remains at its current level of £5,000.
The adult ISA annual subscription limit remains the same at £20,000.
The annual subscription limit for Junior ISAs and Child Trust Funds is the same at £9,000.
Higher-income Child Benefit threshold
Since January 2013, people claiming Child Benefit must pay a charge if either member of a couple earns more than £50,000. This threshold is unchanged.
The tax-free amount you can pay into a personal pension remains at £40,000. The lifetime allowance for pension savings remains at £1,073,100 and is frozen until 2026.
Capital Gains Tax
The Capital Gains Tax annual exempt amount remains at £12,300 and is frozen at this level until 2025/26.
There is no change to the Inheritance Tax (IHT) nil rate band. The threshold remains at £325,000 and will stay the same until 2026.
Stamp Duty Land Tax
The stamp duty holiday for the first £500,000 Nil Rate Band of the purchase price will continue until the end of June 2021. From 1st July 2021, the Nil Rate Band will reduce to £250,000 until 30 September 2021 before returning to £125,000 on 1 October 2021.
Company Vehicles and Fuel Benefit
Cars first registered after 5th April 2020 will see their Benefit in Kind charge increase by 1%. The percentage applied to the list price of the car will increase based on CO2 emissions published by the Vehicle Certification Agency. This HMRC has published a useful online company car tax calculator.
Fully electric cars have no tax charge this tax year, but next year will be charged at 1% of their list price, increasing to 2% in 2022/23.
If you use company-bought fuel in a personal capacity, it is a Benefit in Kind. The tax on fuel benefit has increased as follows:
- The BiK on company vans increases to £3,500 (from £3,490)
- The BiK on fuel for a van for personal use increases to £669 (from £666).
This can be reduced under some circumstances – e.g. if the van isn’t driven for 30 days in a row or if you pay for private use of the van.
Fuel benefit for company cars
An employee who has a company car and free fuel from the employer is taxed on the cash equivalent value of the benefit each tax year. This has increased from £24,500 to £24,600.
Corporation tax remains at 19% of company profits but will rise to 25% from April 2023. At this point there will be a new ‘small profits rate’ of 19% for companies with profits of less than £50,000. The rate rises in line with profits above this level.
Businesses with profits over £250,000 will pay the full rate of 25% from April 2023.
Entrepreneurs’ Relief is now Business Asset Disposal Relief. It reduces Capital Gains Tax when you sell a business asset. The lifetime allowance limit remains capped at £1 million.
Information for Employers
National Minimum Wage and National Living Wage
The National Minimum Wage and National Living Wage amounts have increased to £8.91 per hour. It now applies to any adult aged 23 years and above.
The earnings thresholds above which you must start to repay a student loan have increased:
Plan 1 loans now £19,895 (was £19,390)
Plan 2 loans now £27,295 (from £26,575)
A new Postgraduate Master’s Loan has been introduced by the government. It is repaid in the same way as any other Student Loan. Interest is charged from the day of the first payment. Repayment will be at 6% for students in England and Wales on income above £21,000.
Workplace pensions (auto-enrolment)
There are no changes to the minimum contribution for employees’ auto-enrolment workplace pension. The total of employer and employee contributions remains a minimum of 8% of the employee’s qualifying earnings.
The apprentice hiring incentive in England has been extended to September 2021. The payment has increased to £3,000. A new flexi-apprenticeship scheme will allow apprentices to work with multiple employers in a sector.
Extension of Covid support
The grant for the self-employed and the CJRS Furlough scheme have both been extended.
Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1 April 2021 to 30 June 2021.
This will be followed by 66% business rates relief from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
Recovery Loan Scheme
The Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. The scheme will be open to all businesses, including those that have already received support under the existing COVID-19 guaranteed loan schemes.
The previous Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme have now closed.
New ‘Restart Grants’ to help businesses in England reopen from April 2021 include:
- Up to £6,000 per premises for non-essential retail.
- Up to £18,000 for hospitality and leisure venues that cannot open until later in the year.
Statutory Sick Pay
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee.
Universal Credit and Working Tax Credit
The temporary additional £20 Universal Credit uplift will be extended by a further six months and also announced a £500 one-off payment for eligible Working Tax Credit claimants.
Need some support?
For a discussion about what these rules mean for your business, get in touch. Here at Wootton & Co we take time to explore all the options for our clients. Our accountancy services include personal tax planning, business accounting and payroll. Contact the team to find out why we’re a trusted Lune Valley Accountant for companies large and small.