All the important rates and threshold for the tax year 2021/2022

 

National Minimum Wage


This takes effect from 01 April 2021 and all workers are entitled to.

 

Category of worker

Hourly rate

Aged 23 and above

£8.91

Aged 21 to 22

£8.36

Aged 18 to 20

£6.56

Under 18 (but above compulsory school leaving age)

£4.62

Apprentices aged under 19

£4.30

Apprentices aged 19 and over (but in the first year of their apprenticeship)

£4.30

 

Please note the age rate bracket has changed from previous years also.

 

PAYE Tax Rates and Threshold


These rates depend on the amount of income you earn.

 

Personal allowance

£12,570

Basic tax rate – 20%

£12,571 – £37,700

Higher tax rate – 40%

£37,701 - £150,000

Additional tax rate – 45%

£150,000+


Employment Allowance

 

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount.

 

Employment Allowance

£4,000

 

Statutory Sick Pay (SSP)

 

The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week.

 

Number of qualifying days in week

1 day to pay

2 days to pay

3 days to pay

4 days to pay

5 days to pay

6 days to pay

7 days to pay

1

£96.35

 

 

 

 

 

 

2

£48.18

96.35

 

 

 

 

 

3

£32.12

£64.24

£96.35

 

 

 

 

4

£24.09

£48.18

£72.27

£96.35

 

 

 

5

£19.27

£38.54

£57.81

£77.08

£96.35

 

 

6

£16.06

£32.12

£48.18

£64.24

£80.30

£96.35

 

7

£13.77

£27.53

£41.30

£55.06

£68.83

£82.59

£96.35

 

Dividend Allowance


You also get a dividend allowance each year. You only pay tax on any dividend income above the dividend allowance.

 

Dividend Allowance

£2,000


Mileage Allowance


The allowed deductible rate per mile for business use.

 

Type of vehicle

Rate

Car

45p (for the first 10,000 business miles, then 25p for each subsequent mile)

Motorcycle

24p

Cycle

20p

It has been great to see the UK finally move in a positive direction out of lockdown. While we can look forward to restrictions loosening, we need to remember the financial new rules coming in April. It is always this time of year when the financial rules start to come in to place, the budget will be announced this week, and we will digest this for you to see what kind of economical shape we will be in, so keep your eyes for that one.

 

IR35 (Off Payroll Working)

 

The long overdue of IR35 also known as off payroll working, was initially announced to come in, in April 2020, however due to the pandemic, this has been pushed back to April 2021.

 

This will affect you if you are in the private sector from any industry and provide a service through an intermediary such as your own limited company, a partnership or an individual who is on self-assessment and the client could constitute an employer/employee relationship.

 

So, why are these rules coming in?

 

The rules are coming into level the playing field and to make sure that workers who would have been an employee if they were providing their service directly to the client, pay broadly the same tax and national insurance contributions as employees. You could claim travel expenses and other expenses before, which would lower your tax liability, now this will not be allowed.

 

If you are a worker and your client is in the private sector, it is your responsibility to decide your own employment status for each contract. Things that will help decide your employment status are;

·         Who has the control? Can you reject certain projects and decide your working days?

·         Do you use your own tools?

·         Do you have public liability insurance?

 

If you are a worker and your client is in the public sector like a school or library, it is their responsibility to decide your employment status. You should be told of their decision; we have seen a large number of the larger companies starting to make changes to their arrangements with their subcontractors in preparation for this.

 

Reverse Charge VAT

 

If you are in the construction industry, there are changes coming in from

1st March 2021 to the way you apply VAT to your invoices. If you are VAT registered in the UK, and supply building and construction industry service, if the following applies for you, then you will have to use the reverse charge;

·         Your customer is registered for VAT in the UK

·         Payment for the supply is reported within the Construction Industry Scheme (CIS)

·         The services you supply are standard or reduced rated

·         You are not an employment business supplying either staff or workers, or both

·         Your customer has not given written confirmation that they do not make onward supplies of the building and construction services supplied to them, also known as an end user.

 

So, that might have been a bit of jargon and hard to follow, so let us break this down in simpler terms.

 

Example 1

If Alpha Ltd are selling a standard or reduced rated service for building and construction to Joe Bloggs (this can be a company as well), and Joe Bloggs is VAT and CIS registered and has not given Alpha Ltd written confirmation that he is an end user, then the reverse charge VAT must be used.

 

Alpha Ltd bills Joe Bloggs;

Net - £1,000

VAT - £0

Gross - £1,000

(Reverse charge applies)

 

Example 2

If Alpha Ltd are selling a standard or reduced rated service for building and construction to Joe Bloggs, and Joe Bloggs is not VAT registered, then the reverse charge must not be used, and VAT must be charged as normal.

 

Alpha Ltd bills Joe Bloggs;

Net - £1,000

VAT - £200

Gross - £1,200

 

The services you may provide that are subject to reverse charge are;

·         constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services

·         installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure

 

Please click here for the full list of services.

 

What you will need to do

 

If you are needing to use reverse charge VAT then you will need to verify some of your customers information. You will need to verify;

·         If your customer has a valid VAT number – (Click here to verify)

·         If your customer is reporting under CIS. (This can be verified using the construction industry scheme online service)

Sole trader:

o   Name

o   Unique taxpayer reference

o   National Insurance number

 

Company:

o   Name of Company

o   Company’s unique taxpayer reference

o   National Insurance number

 

·         Ask your customer to confirm whether they are an end user or intermediary supplier (you will need written confirmation)

 

 

These rules will be enforced by HMRC, so you will have to take care to do this correctly. If you are facing problems with your own subcontractors with IR35, or if you are not sure whether this reverse charge VAT applies to you, please get in touch with us. This can be complicated to get your head around. 

If you have sold an asset that has increased in value, then Capital Gains Tax will be due. It is the gains that you will pay tax on and not the amount of money received. When Capital Gains Tax is due, it is more than often, when a house has been sold. Although Capital Gains Tax will be due when you have sold a painting, stocks and shares, sale of a business etc…


So, for example, if you have bought a house for £120,000 and sold it for £190,000 then Capital Gains Tax will be due on £70,000. You do not pay any Capital Gains Tax if you have sold a house that is your main home and residence. You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.

 

Your tax-free allowance also known as the Annual Exempt Amount for Capital Gains for this current tax year (2020/2021) is £12,300.


You do not pay Capital Gains Tax on assets you give or sell to your husband, wife, or civil partner, unless,

 

If they decide to sell later, they may have to pay tax on any gain. Their gain will be calculated on the difference in value between when you first owned the asset and when they sold it. They should keep a record of what you paid for the asset


The rules have changed from April 2020.


 If you sell a house, you must report and pay any tax due within 30 days of selling. Before you had until your next self-assessment to report and pay. If you have not reported and paid any gains within 30 days of selling, HMRC can charge penalties and even interest on any late payments.

 

You will have to register and you’ll need a Government Gateway user ID and password to set your account up or sign in. If you do not have a user ID, you can create one the first time you sign in.


You will need the following information at the ready,

  • Property address and postcode
  • Date you got the property
  • Date you exchanged contracts when you were selling or disposing of the property
  • Date you stopped being the property’s owner (completion date)
  • Value of the property when you got it
  • Value of the property when you sold or disposed of it
  • Costs of buying, selling or making improvements to the property

 

Once you have an account you can sign in at any time to report Capital Gains Tax on UK property or see any returns you have already sent.

 

Once you have sent your return to HMRC, you will be notified on how much you owe in Capital Gains Tax, how to pay and when to pay by.


How much do I pay?


Rates on Capital Gains varies. If you are a higher rate taxpayer you will pay,

  • 28% on your gains from residential property
  • 20% on your gains from other chargeable assets

If you are a basic rate taxpayer, the rate depends on the size of the gain and your taxable income.


  1. Work out your taxable income
  2. Work out your taxable gains
  3. Deduct your annual exempt amount from your taxable gains
  4. Add this to your taxable income
  5. Work out which tax rate you pay

If the amount falls within the basic income tax band (£12,501 to £50,000 for 2020/2021) you will pay,

  • 18% on your gains from residential property
  • 10% on your gains from other chargeable assets

 

You will pay the higher taxpayer rate for any amount above the basic tax rate.


Example

Your taxable income (your income minus your personal allowance and any income tax reliefs) is £15,000

 

You sell a house for £200,000 which you bought for £170,000 for a gain of £30,000

 

Deduct your Annual Exempt Amount which is £12,300 (for tax year 2020/2021) leaving you with a chargeable gain of £17,700

 

Your basic rate band remaining after your taxable income above is £22,500 (£37,500 - £15,000)

 

As the £17,700 is fully within the basic rate band, this is taxed at 18% which means you will have to pay £3,186 in Capital Gains Tax.


You need to collect records to work out your gains and fill in your tax return. You must keep them for at least a year after the Self-Assessment deadline. You will need to keep records for longer if you sent your tax return late or HM Revenue and Customs (HMRC) have started a check into your return. Businesses must keep records for 5 years after the deadline.

 

The new 30-day rule can make things stressful but being organised and keeping records will help a lot. If you are struggling with Capital Gains Tax, give us a call on 02920 653 995 to see how we can assist you.

We have all been paying closer attention to the news in recent times. It does look like better days are to come, with restaurants and bars been given the green light to open. While we all are excited and wanting to enjoy ourselves, please remember to social distance as this is still very vital to our fight against this virus.

 

The Chancellor, Rishi Sunak has pledged great support during these tough times and has again set the foundation for all of us to come out of this. It will be no easy job, but together we can do this. Supporting small businesses is vital.

 

The Chancellor mentioned a few things in his speech, while some of his policies apply to Wales, others do not as they are the responsibility of the Welsh Government. We digest the main points here.

 

Job Retention Bonus

 

The furlough scheme will be ending in Wales at the end of October. We are more reliant on the job retention scheme here in Wales than any other part of the UK. There are about 300,000 people on the furlough scheme. The Welsh Government has said that it does not have the "financial fire power" to be able to continue the scheme itself.

 

The Chancellor said he would be introducing a new scheme called the Jobs Retention Bonus. Under the new scheme, firms will be paid £1,000 for each employee they bring back from furlough and continuously employ through to January 2021 on an average of at least £520 a month.

 

            Eating Out Discount

 

The Chancellor has said there will be a 50% discount on food if people eat out in August on Mondays to Wednesdays. This is to try and get people using restaurants.

 

This will entitle every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub, or other eligible food venue. There is not a limit to the amount of times the discount can be used and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for all of August. Participating establishments will be fully reimbursed for the 50% discount.

 

Temporary VAT Cut

 

If you supply food and non-alcoholic beverages for consumption on your premises, for example, a restaurant, café or pub, you’re currently required to charge VAT at the standard rate of 20%. However, when you make these supplies between 15 July 2020 and 12 January 2021 you will only need to charge 5%

It will apply to supplies of accommodation and admission to attractions as well. This will include takeaways, restaurants, cinemas and theme parks.

 

These are all in the pilot stages, and more information is to be released in the days to come. As soon as we know, we will also share the information with you. If there is something you want to know more about, you can call us on 02920 653995 to discuss. The introduction of these will mean we have a better chance to finish 2020 on a high.

It has been several weeks now since the whole country has come to a standstill. We still have strict restrictions in place, however there is still a lot we can do to ensure our businesses does not just fade away. We have all put endless efforts into our business and now is not the time to just give up. You should still be on social media, promoting your business, so once all this is over, and it will all be over, your business is in the front of everyone’s minds.

 

Our previous Coronavirus Blog detailed how you could get support from the Government Retention Scheme to the grants that are available. To read our previous blog, please click here https://bit.ly/Covid19interruptionCrossAcc

 

Bounce Back Loan

 

There will be support in the form of a bounce back loan which will help you to borrow between £2,000 and up to 25% of their turnover. The maximum loan is capped at £50,000. The government has guaranteed 100% of the loan and there will not be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

 

To be able to apply for the loan you will have to be based in the UK, have been in business before 1st March 2020 and your success or development have been impacted by the coronavirus.

 

You cannot apply if you are already claiming under Coronavirus Business Interruption Loan Scheme or COVID-19 Corporate Financing Facility. If you have already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme. A deadline of 4 November 2020 has been set to arrange with your lender.

 

The length of the loan is 6 years, but you can repay early without paying a fee. No repayments will be due during the first 12 months and any charges for the loan will be covered by the governments guarantee.

 

There are several lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the bank’s website. The lender will ask you to fill in a short online application form and self-declare that you are eligible. The lender will decide whether to offer you a loan or another type of finance and you will be responsible for repaying 100% of the amount borrowed.

 

Self-Employment Income Support Scheme

 

In line with the Chancellors commitment to help businesses who have been affected by the coronavirus, HMRC have launched the self-employment scheme. You should receive a letter through the post stating that you may be eligible. You will have to go to the HMRC website and complete an eligibility checker to see if you are eligible. You will need your National Insurance number and Self-Assessment Unique Taxpayer Reference (UTR) number.

 

If HMRC confirm you are eligible, then you will need your Government gateway and user ID and password, if you have not created this yet, you will have to, to commence with the claim. You will have to enter your correct contact details as HMRC will contact you, using these details to tell you when the claim system is available for use.

 

HMRC will automatically calculate the income support you are entitled to, based on the information submitted from previous tax returns. After HMRC have received and checked your claim, they will pay the money directly in to your bank account in six working days.

 

You will need to make the claim yourself, although you can seek advice from an accountant. The grant is also not for limited companies or anyone operating a trade through a trust. HMRC will check claims and take action to withhold or recover payments found to be dishonest or inaccurate.

 

We are still available on the phone and by email, so if you do want to talk through what may be your best option, please feel free to contact us. We are always happy to help.