What a year! 2021 saw the government make many significant tax announcements as it aimed to revive the economy in the wake of the COVID-19 pandemic and the handing out of unprecedented levels of financial state aid. It was a year of total contrast for businesses and their owners.

While many businesses have struggled financially due to the pandemic and Brexit has forced a lot of real change, 2021 has also been a bumper year for many others, including certain, accountancy and financial services sectors and those buoyed up by business rates relief and bounce-back loans. 

What was hot, or not in 2021?

COVID-19

  • As the world saw new 'waves' of the virus and new vaccines were rolled out at record levels, the government continued its program of support for business for most of the year. All sorts of business claimed COVID-19 bounce back loans, including a few who took out loans without any plans to repay then. 
  • As we move into the last month of Self Assessment reporting for the 2020-21 tax year, one unintended consequence of state aid receipts is the headache of reconciling and reporting the different types of coronavirus support payments for tax.
  • See COVID-19 Zone

 Tax rises in both NICs and dividend tax rates

  • In September 2021, the prime minister, not the chancellor, announced a new 'Social care levy'. It adds 1.5% to the rate of National Insurance and dividend tax from 6 April 2022.
  • See Increases to Dividend Tax
  • See Increases to NICs

Making Tax Digital for Income Tax

  • Tax Basis Year Reform was confirmed. This aims to simplify the Income Tax rules for the self-employed by allocating trading profit to tax years regardless of the business’ accounting period end date. This applies from April 2024 with a transitional period in 2023-24. This will only affect you if you are self-employed with an accounting period that ends on a date other than March 31-5 April. See also Accounting periods and basis periods.
  • It was also confirmed, after several postponements, that from April 2024: self-employed businesses and landlords with business turnover above £10,000 are required to report under MTD for ITSA. See Making Tax Digital

Corporation Tax

  • Ahead of his March 2021 budget, the Chancellor announced an increase in the rate of Corporation Tax from 19% to 25%. Coming into effect in April 2023, this will apply to all companies with profits over £50,000. Company owners should note that this creates a good opportunity to review your group structure and associated companies.
  • By the end of 2021, OECD countries, the UK included, signed An historic deal to agree a global minimum Corporation Tax rate of 15% from 2023.

Stamp Duty Land Tax

  • SDLT residential property rates changed twice: on 1 July and 1 October 2021.
  • First-time buyers relief ended on 1 July.
  • We developed our unique SDLT MDR Annex Tool for our subscribers: if you are aiming to purchase two properties in a single transaction you will like this as it saves thousands of pounds in professional fees. 

VAT 

  • A domestic reverse charge VAT was introduced on 1 March for business-to-business Construction Industry Scheme supplies. This measure was designed to combat fraud in the sector. We await analysis from HMRC to see how well this massive change has rolled out. 
  • The temporary reduced rate of VAT for hospitality businesses rose from 5% to 12.5% on 1 September 2021. 

Making Tax Digital (MTD) for VAT: new penalties

  • Despite calls to government to postpone the introduction of a new and complex Points Based Penalty system, the chancellor confirmed that a new system of late filing and payment penalties will be rolled out for accounting periods beginning on or after 1 April 2022.

Off-Payroll Working for private sector

  • The deferred extension of the Off-Payroll Working rules to the private sector commenced on 6 April 2021. 
  • The change in the Off-Payroll Working rules means that payrolling is far more likely to be outsourced and has seen a rapid rise in the number of payroll 'umbrella' companies who operate PAYE on agency staff, or on  behalf of public sector end clients. There is widespread concern that offshore companies have continued to promote abusive tax-avoidance schemes paying wages in the form of loans to avoid PAYE.
  • See Off-Payroll Working: at a glance

Off-Payroll Working for the public sector

  • Five government departments, Defra, MoJ, DWP, Home Office, and Dept of Health named and shamed themselves for failing to operate the Off-Payroll Working rules.

CGT filing deadline

  • From 27 October 2021, as announced in Autumn Budget 2021, the CGT filing & payment deadline for UK residential property sales increased from 30 days to 60 days following completion. 

Brexit

  • The 2021 new year should have seen the launch of 'Global Britain' following the UK's departure from the EU on 31 December 2020, however COVID-19 disrupted plans.
  • Chapter 1 of Brexit has been dominated by the long-running issue of the Northern Ireland Protocol. Brexit created a Northern Ireland customs border which many see as impacting the Good Friday Agreement. In terms of tax, new customs duties and tariffs apply to goods which now come from Northern Ireland as well as the EU into the UK.

Inflation

  • The UK's rate of inflation rose to 5.1% in 2021, well ahead of the Bank of England's headline rate of 2%.
  • Inflation is being fuelled by a combination of different things, including a long period of quantitative easing, combined with global shortages of certain resources across the world and supply chain problems post COVID-19 lockdown and Brexit.
  • The law of supply and demand has led to large price hikes, and consumers will have noted large price increases for the cost of energy, building materials, eating out and imports from the EU. Businesses have been forced to pay more for transport and other labour in short supply.

What else happened in 2021?

Finance Act 2021: tax update and rolling planner
Further measures & announcements in 2021, including Plastic Packaging Tax, Freeports and much more! 

What's hot for 2022?

Check out our Finance Bill 2022 tax update and rolling planner for full details and links.

 


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