With the end of the tax year fast approaching, now is the time to start looking ahead to the new tax year, the announcements made, and any changes that you might need to implement from April.
This is the first in a series of articles, today just looking at the overall highlights of the areas affected. Over the next two weeks, there will be more in-depth looks at each of the areas and how they might affect your business or personal taxes.
Overall Key Budget Points
I think most of us expected a budget full of doom and gloom, and while there is no denying the impact that the past year has had on businesses and the economy, the budget was far more optimistic than expected, and certainly gives us something to work with as we navigate the challenging times ahead.
- The main rate of corporation tax is rising from the current 19% to 25% from April 2023.
- Options and higher rate thresholds are increasing this year, but all increases are then expected to be on hold until the tax year 2025/26
- The VAT cuts for the hospitality and tourism sector introduced last year have been extended until 31st March 2022.
- The stamp duty land tax holiday is extended until 30th June 2021, with a transitional nil rate band of £250,000 applying until 30th September 2021.
Business Taxes Key Points
- The main rate of corporation tax will increase to 25% from April 2023
- A new small profits corporation tax rate of 19% will be introduced in April 2023
- A 130% “super deduction” will be introduced for capital investments in qualifying new plant and machinery
- Trading losses can temporarily be carried back for three years
Capital Taxes Key Points
The current capital gains tax annual exempt amounts of £12,300 for individuals and £6,150 for most trustees will remain the same up to and including the 2025/26 tax year
The inheritance tax nil-rate band and residence nil-rate band are also frozen at their current levels (£325,000 and £175,000 respectively), until 5th April 2026
Income Taxes Key Points
Personal allowances are frozen at £12,570 from 2021/22 until 2025-26
Basic and higher rate income tax thresholds are frozen at £37,700 and £50,720 from 2021/22 until 2025/26
Pension lifetime allowance is also frozen at the current level of £1,073,100 from 2021/22 through to 2025/26
Payroll and Employees Key Points
The reliefs introduced for home office expenses, Covid tests and cycle exemptions have been extended.
The furlough scheme has been extended until the end of September 2021.
VAT and Indirect Taxes Key Points
The stamp duty land tax holiday on property that is valued up to £500,000 is extended by three months to 30th June 2021, then tapered off finally ending 30th September 2021.
The temporary 5% reduced rate of VAT introduced for hospitality and tourism businesses will be extended by six months. Thereafter it will be increased to 12.5% for size months
The VAT registration threshold is fixed at £85,000 until 31st March 2024