Tax changes to affect individuals and businesses in 2021/22

dunkley

Income tax and National Insurance (NI) thresholds will rise as the 2021/22 tax year gets under way and remain frozen until April 2026.

Both the personal allowance and higher-rate threshold will increase 0.5% for 2021/22, with no further increases planned for the next five tax years.

This “stealth tax grab” by the Treasury will drag more people into paying income tax for the first time or into paying the 40% rate in the future.

But from 6 April 2021, higher-rate taxpayers can earn an extra £270 (basic-rate taxpayers £70) without paying income tax.

With NI, employed workers can earn £68 more and the self-employed can take home an extra £68 in profits in 2021/22 before contributions kick in.

You’re probably asking “is that it for 2021/22?” The short answer is “no”.

Here’s what else is changing from April, particularly for house buyers, bricks-and-mortar business owners and private-sector contractors.

Business rates extension

It feels like major changes to business rates in England are in the pipeline, with a fundamental review finally due in the autumn.

From 1 April 2021, the business rates holiday which applies to eligible retail, hospitality and leisure firms in England is in place until 30 June 2021.

From 1 July 2021, businesses in these sectors will pay a third of their normal charge until 31 March 2022 with potentially new rules to kick in thereafter.

The two business rates multipliers, which determine how much you have to pay in business rates before any relief, have also been frozen for 2021/22.

IR35 rules extend to the private sector

Extending the off-payroll working rules, known as IR35, to the private sector has been a long time coming after COVID-19 delayed its rollout last April.

The rules affect medium and large-sized organisations that operate in the private sector, but do not apply to small private-sector businesses.

Around 80,000 businesses will be responsible for checking the employment status of 170,000 contractors to determine if the rules apply.

HMRC will not issue non-compliance fines for the first 12 months, however, unless there is evidence of deliberate non-compliance.

Stamp duty land tax extension & taper

Raising the stamp duty land tax threshold in England and Northern Ireland last July created a stampede to buy a new home before the first deadline.

Buyers were initially spared from paying any stamp duty if they completed the purchase of a home for £500,000 or less on or before 31 March 2021.

This deadline has been moved to 30 June 2021 after a three-month extension was announced to get thousands of deals over the line.

From 1 July 2021, a new taper kicks in. Firstly, the nil-rate band will reduce from £500,000 to £250,000. Then on 1 October 2021, it goes back to £125,000.

Get in touch

If you want to discuss any of these tax changes, call Dunkley’s dedicated tax team on 01454 619900 or email advice@dunkleys.accountants.

enewsletter