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.

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.

Employment Allowance

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

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.

Dividend Allowance

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

Mileage Allowance

The allowed deductible rate per mile for business use.

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

1^st 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,

• You separated and did not live together at all in that tax year
• You gave them goods for their business to sell on

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,

Example

As summer has ended and the colder nights approach, it can be a bit tough to take with the local lockdowns in place. We need to try and stay spirited and make the most of our situation. If you are having to close or reduce hours, make sure to keep promoting your business on social media, so once you are back, you are still in front of people’s mind. There is some support still out there, carry on reading to see what you can apply for before the deadlines approach.

Coronavirus Loans

The Chancellor, Rishi Sunak has announced that businesses that have borrowed money through the government's loan scheme, such as the “bounce back” loan and the “Coronavirus Business Interruption Loan Scheme” would be given more time to repay the money.

A new Pay as You Grow flexible repayment system has been introduced by the chancellor for small businesses who took out the "Bounce Back". It means borrowings can be repaid over ten years instead of the original six-year term.

The longer repayment time also applied to small and medium-sized firms who borrowed under the “Coronavirus Business Interruption Loan Scheme”.

Businesses will also have more time to apply for these loans, application dates for the schemes had been due to end in October.

Job Support Scheme

As furlough comes towards the end, the chancellor announced a new replacement scheme for the Job Retention Scheme (furlough). From 01 November, the new scheme known as Job Support Scheme will see that the government will contribute towards the wages of employees who are working fewer than normal hours.

Any hours worked by the employees the employer will continue to pay their usual wages of the hours worked. For hours not worked, the government and the employer will each pay one third of the equivalent salary. The government’s contribution will be capped at £697.92 a month.

Kickstart Scheme

With Coronavirus effecting everyone, some of the hardest hit were the young people. The Kickstart Scheme provides funding to employers to create new 6-month job placements for young people aged between 16 – 24 who are currently claiming Universal Credit and at risk of long-term unemployment.

This is the government’s plan for jobs and to create hundreds and thousands of new, fully funded jobs across England, Scotland and Wales. More details are yet to come out and the first placements are likely to be available from November.

The Kickstart Scheme will cover 100% of the National Minimum Wage for 25 hours a week as well as the employer National Insurance contributions and employer minimum automatic enrolment contributions.

There will also be extra funding to support young people after the 6-month period to help build their experience and help them move into sustained employment after they have completed their Kickstart Scheme.

Self-Employment Income Support Scheme

The previous support for the self-employed has been decided by the government to be extended. The extension will provide two grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a 3-month period.

You must currently be eligible for the original Self-Employed Income Support Scheme, though you do not need to have claimed it. It must be declared that you are actively trading and that you are impacted by the pandemic. HMRC will provide more details about claiming in due course.

VAT Reduced Rate

There was a series of new measures introduced to help hospitality, holiday accommodation and attractions sector. These included VAT being cut to 5%, effective from 15 July 2020. The VAT cut will remain in place and has been extended to run until 31 March 2021.

For restaurants and cafés that provide food services for both take away and dine in, the temporary reduction in the VAT rate only applies to;

·         Food for consumption on the premises on which they are supplied

·         Non-alcoholic beverages for consumption on the premises on which they are supplied

·         Hot takeaway food for consumption off the premises on which they are supplied

·         Hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied

We all need to continue supporting each other, shop local wherever possible, helping the small independent shops. Let’s follow government guidelines and rules, to stop a spike in cases and who knows, our sacrifices may be worth it when we may be able to celebrate come Christmas.