Despite an eventful year, there’s relatively little in the way of tax changes set to take effect when the 2021/22 tax year begins on 6 April 2021.
The Spring Budget at the start of March held few surprises and the more recent ‘tax day’ on 23 March was more focused on longer-term plans, rather than immediate changes.
That will come as a relief to those who had been predicting tax increases to start paying off the cost of COVID-19 support, which is now well over £300 billion.
Most major changes, such as an increase to corporation tax, won’t happen for another couple of years, and several tax thresholds are set to be frozen after this year.
There are, however, some measures to be aware of, including the long-anticipated reform to IR35 in the private sector and some of the UK economy-boosting measures set out in the recent Budget.
Key tax changes for small businesses in 2021/22
One of the headline measures from the Spring Budget was a new ‘super-deduction’ for companies that invest in qualifying plant and machinery assets.
This offers 130% first-year relief for expenditure incurred between 1 April 2021 and 31 March 2022.
On the other hand, R&D relief for small and medium-sized businesses will be limited from 1 April 2021, with the amount of payable tax credit capped at £20,000 plus 300% of the company’s total PAYE and National Insurance liability for the period.
Another major change from 6 April 2021 is the reform to the off-payroll working rules, also known as IR35, in the private sector. Medium and large-sized businesses will be responsible for determining their contractors’ employment status for tax.
Small private-sector businesses shouldn’t need to change the way they work with contractors as a result of this, but it could have knock-on effects for the contracting sector as a whole.
There’s also an update to Making Tax Digital for VAT this year, which will require those on the scheme to use digital links for any transfer of data between software from 1 April. That means copying and pasting from a spreadsheet into your accounting software will no longer be accepted by HMRC.
And as usual, employers will need to make sure their payroll systems are ready for the latest student loan rates, and that all staff are being paid at the 2021/22 national minimum or living wage rates.
Companies that provide fuel or use of a vehicle for personal use will need to be aware of the changes to benefit-in-kind rates from April, too.
This includes an increase to the company car fuel benefit multiplier from £24,500 to £24,600, the van benefit charge rising from £3,490 to £3,500, and the van fuel benefit charge going from £666 to 669.
HMRC has a calculator you can use to calculate tax on employees’ company cars.
Finally, while it’s not a tax change, most businesses will want to know about the COVID-19 financial support that’s available over the next few months.
The furlough scheme and self-employed grants have both been extended to the end of September, and new ‘restart grants’ will become available for businesses in sectors that are reopening from April.
A ‘recovery loan scheme’ will also launch on 6 April, replacing the other COVID-19 loan schemes. This offers loans of up to £10 million for eligible businesses, and will run until the end of December.
Finally, those in the retail, hospitality and leisure sectors in England will continue to receive 100% business rates relief from 1 April to 30 June 2021.
This will decrease to 66% business rates relief from 1 July to 31 March 2022, capped at £2m per business for properties that were required to be closed on 5 January 2021 – or £105,000 per business for other eligible properties.
Key tax changes for the charity and medical sectors in 2021/22
Many of the measures affecting businesses could apply to charities too, especially when it comes to COVID-19 support and big changes like IR35.
One of the updates announced on 3 March was the extension of social investment tax relief. This was due to end in April 2021 but will now apply until April 2023, allowing individuals to continue benefiting from tax relief when they invest in social enterprises.
The healthcare sector won’t see any major tax changes either, but for doctors and other higher earners in the medical profession, the freezing of personal tax thresholds could mean higher tax bills over the next few years.
In particular, the decision to freeze the pensions lifetime allowance at its current rate of £1,073,000 until April 2026 could cause problems for those with an NHS pension, resulting in substantial tax charges for some.
The British Medical Association predicts 72% of doctors could leave the NHS earlier than previously planned as a result.
At JCS, we offer specialist accounting support for charities, healthcare and small businesses.