The rules and regulations surrounding taxes can change from year to year and with the new tax year having begun on 6th April 2021, there may be more changes to come. It’s important to know what these changes are and how they can affect your business otherwise you’re at risk of being punished for failure to comply. That’s why we’re looking ahead to the 2021/22 tax year and outlining these changes, so you know exactly what to expect. At Williamson & Croft, our purpose is to help you and ensure your accounting needs are catered to. With expert advice and a team full of chartered accountants, we can help you navigate the sometimes uncertain changes that come with the arrival of a new tax year.
These tax changes can affect various aspects of your business and potentially force you to change the way you operate in order to comply. Similarly, you may find the changes comfortable and manageable in your business’s current state. Changes to taxes can affect everything from the salaries you pay your staff to the cost of imports, but either way, you need to be aware of the changes. Without further ado, here’s how the tax year is going to change in April.
One of the changes which are being made in the 2021/22 tax year is the increase of living and minimum wage amounts. For employees aged 23 and over, their minimum living wage is increasing to £8.91 per hour and the minimum wage for those aged 21 to 22 is being increased to £8.36. The minimum wage for those aged 18 to 20 will be increased to £6.56 and anybody under the age of 18 will be paid £4.62. Further changes to the wage structure will affect apprentices under the age of 19 or in their first year, which will see them collect a wage of £4.30.
As these increases will be enforced by law from April 6th, you must prepare for how these changes will affect your allowance for staff wages. Without sufficiently preparing for these changes your finances could fall short or your plan to bring onboard more staff may need to be changed. These aren’t the only changes relating to income, however, as income tax is also set to increase. The new figures are as follows – personal allowance up to £12,570 will have a 0% tax rate, the basic rate of £12,571 to £50,270 will have a tax rate of 20%, higher rates of £50,271 to £150,000 will have a tax rate of 40% and the additional rate at more than £150,000 will have a 45% tax rate.
As it stands, there are no changes to corporation tax set to come into play on April 6th 2021, however, it looks as though there will be an increase in a few years time. By the time 2023 rolls around there will be changes to the upper profits threshold that will come into force and require 25% corporation tax to be paid on all profits over £250,000. While this isn’t something to worry about when this tax year commences, it is something your business should consider if you’re turning over profits larger than this amount. You must also factor growth into your long term plan as you may not be achieving those profits now, but in 2 years, you may have reached these levels of profit.
For businesses turning over less than £250,000 profit, they will have to comply with a different tier of corporation tax known as small profits tax, which applies to businesses making under £50,000 profit. This particular tax band requires businesses to pay 19% of their profits in corporation tax. If the amount of profit is between £250,000 and £50,000, businesses will have to comply with a new tier system of corporation tax which has not yet been revealed. The government has announced this new tier system is set to come into play at the beginning of the new tax year in April of 2023. You don’t have to plan for this alone though, we’re experts at tax planning and giving you helpful advice to ensure your finances and compliance remains in order.
Between April 1st 2021 and March 31st 2023, companies can benefit from a super deduction in capital allowance which will allow them to save money when buying machinery assets. Companies can claim back the cost of these assets as a first-year capital allowance, plus an additional 30%. The government has made this move to try and encourage business to invest and grow. This could all change by the 2023 tax year, however, so any long term planning should factor in these potential changes in a couple of years.
There aren’t any changes to VAT rates set to come into play during this tax year, except for some slight changes which have been introduced as a result of coronavirus. Businesses in the hospitality sector have taken a big hit amidst the coronavirus, with customers unable to eat and drink inside a company’s premises, limiting their sales to delivery or takeaway only. The government has recognised this and now only requires businesses in this sector to pay a reduced VAT rate of 5%. This rate was initially set to end on March 31st 2021, after being introduced in July 2020, but it has now been extended to September 30th 2021. The end of this period in September will see the introduction of a new rate of 12.5%, which will end on March 31st 2022, making way for a new rate. From April 1st 2022, the rate will return to 20%, completing the natural increase from the lowered rate back to the original figure.
As part of these reductions in VAT to relieve pressure on businesses in the hospitality sector, there are also further breakdowns of reductions for flat rate users. For catering services using a flat rate, they will pay 4.5% up until September 30th and after that date, the VAT flat rate will increase to 8.5% up until March 31st 2022, when the figure will return to normal. Hotel and accommodation have been given the most breathing room as they have had no option but to remain fully closed throughout the various lockdowns and tier systems imposed by the government, as a result, they won’t have to pay any VAT until September 30th 2021.
Following this, these businesses will only be required to pay a rate of 5.5% until March 31st 2022. Pubs have also been hit hard by lockdown restrictions, especially those with no takeaway or delivery capabilities, leading the government to lower their VAT flat rate payment to just 1%. This rate will end on September 30th, increasing to 4% up until March 31st 2022.
Navigate Tax Changes With Williamson & Croft
Tax rates have been subject to a lot of change recently, with Brexit forcing a shift in rates at the beginning of 2021 and although the beginning of the 2021/22 tax year won’t see many changes, coronavirus has affected the landscape for many businesses paying VAT, meaning they’ll have to keep an eye on the dates when the rates will once again change. Managing dates and tax rate changes can be difficult, especially when there are other areas of your business that you’ll need to focus your attention on. At Williamson & Croft, we understand that better than anyone and are capable of taking the pressure off you when it comes to handling taxes and accounts.
We offer a wide range of services from tax and advisory help, to various forms of accounting to take the stress off you. These methods are tried and tested and we carry them out in the most effective way possible to ensure that your accounts are always in order and you never miss a tax payment. To begin working with us today, simply call us on 0161 399 0121 or email us firstname.lastname@example.org. Alternatively, you can visit our website and fill out our contact form and we’ll respond to you as soon as possible.