04 Mar The Budget 2021 – Tax Updates
In the first part of the budget announcement for recovery, the government announced that they have no plans on raising income tax, national insurance, or VAT. Capital Gains Tax has also gone unchanged for the upcoming tax year.
Income Tax
For all UK taxpayers, the personal allowance will be increased to £12,570. The higher rate threshold will increase next year to £50,270 (excluding Scottish non savings income). These changes will be frozen until 2026.
With these minor changes, this will mean that no individuals take home pay will be any less than it is at present.
From the Scottish budget, the Scottish non savings tax bands, for the 2021/22 tax year is as follows:
| Band | Income Range | Rate |
| Starter Rate | Over £12,570 – £14,667 | 19% |
| Basic Rate | Over £14,667 – £25,296 | 20% |
| Intermediate Rate | Over £25,296 – £43,662 | 21% |
| Higher Rate | Over £43,662 – £150,000 | 41% |
| Top Rate | Over £150,000 | 46% |
Capital Gains Tax
There will be no change to the tax-free amount available for Capital Gains Tax from the current level (£12,300) until April 2026. There has been no further changes to the Capital Gains Tax rates.
Corporate Tax Rates
For step 2 of recovery, in April 2023 (when it is estimated that the economy has recovered from Covid-19), the corporation tax rate will be increased to 25% from 19% in previous tax years.
It was announced that any struggling businesses will be unaffected by this, due to the fact you are only taxed on your profits. Small businesses will also benefit where their profits are below £50,000 as the current corporation tax rate of 19% is maintained for taxable profits at or below this level. It is estimated that 70% of UK companies will be unaffected by this change.
The 25% corporation tax rate will be tapered with companies that have a profit between £50,000 and £250,000. This means a marginal relief is applied to bridge the gap between the lower 19% and upper 25% limit to create a progressive tax system.
Companies with taxable profits exceeding £250,000 will see their profits taxed at the full 25% corporation tax rate, with no taper relief available.
Carry Back Of Losses
A further change has been made to the treatment of losses. Loss relief will be more generous for the next two tax years whereby Companies can carry back losses up to £2,000,000 into the prior 3 years. This will result in a cash flow benefit as companies can claim tax refunds on the loss carry back relief into prior years where tax has been paid.
The carry back loss relief is available to Companies with periods ending between 01 April 2020 to 31 March 2022. For unincorporated businesses this applies to the 2020/21 and 2021/22 tax years.
Capital Allowances
In addition, the government intends to encourage businesses to invest now at present, to ensure business growth, an unemployment rate decrease and driving the economic recovery.
To do this, to government has introduced a “Super deduction”, where over the next 2 tax years, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. It is estimated that this upfront super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.
It is worth noting this only applies to incorporated businesses and does not apply to second hand equipment purchases, only on brand new equipment.
Staying up to date
Our ethos at Infinity has always been that we are not just your accountants, but we are your partners in business and in these difficult times this has never been more important. We want to assure you all that we are doing everything we can to help you and should you have any question, big or small, please get in touch, we are here to help.
We will be releasing various documents with support and help through various channels. Please connect with our team on LinkedIn and Twitter using the following links.
Simon Cowie – Manging Director – Connect with Simon on LinkedIn
Greg Houston – Associate Director – Connect with Greg on LinkedIn
Alex Graham – Client Relationship Manager – Connect with Alex on LinkedIn
Bruce Giles – Client Relationship Manager – Connect with Bruce on LinkedIn
Mark Rhynas – Tax Manager – Connect with Mark on LinkedIn
LinkedIn – Infinity Partnership on LinkedIn
Twitter – Infinity Partnership on Twitter