Happy new tax year
After a largely uneventful budget and tax day last month, and as we start the 2021/2022 tax year, our resident tax guru, Michael Culver, outlines various tax exemptions, dates and limits to be aware of this year.
The income tax rates this year are as follows:
|Tax Band||Amount of Income||Rate|
|Basic||£12,570 – £50,270||20%|
|Higher||£50,271 – £150,000||40%|
These are slightly increased from last year but are set to remain at this level until 2026.
If you earn less than £12,570, you won’t pay income tax.
In relation to dividends, the tax free allowance remains at £2,000 per annum. Above this, basic rate income tax payers pay tax on dividends at 7.5%, higher rate tax payers at 32.5% and additional rate tax payers at 38.1%.
The savings band for savings income remains at £5,000, whilst the ISA limit remains at £20,000 or £9,000 for junior ISAs and child trust funds.
Pension contributions remain fixed at the £40,000 per annum limit.
If you received income that was untaxed at source during 2020/21, you have until 5th October 2021 to register for self assessment.
Your tax return needs to be completed and returned by 31st October 2021 if filing on paper or 31st January 2022 if filing online.
In either case, the tax due must be paid by 31st January 2022.
Tax returns are a job that many clients put off but we cannot stress enough the importance of getting these started and submitted early.
Capital Gains Tax
The annual exemption for CGT remains at £12,300. All chargeable gains in excess of this need to be included in your tax return or within 30 days of completion of sale if they relate to residential property.
Despite anticipated changes in the CGT regime last month, no changes were made, meaning that your main residence is still exempt from paying CGT (subject to various exemptions and limitations), and entrepreneurs relief for businesses owners has not become any more or less generous.
For gains in excess of the annual exemption, the rates remain at 10% (for basic rate income tax payers making small gains that do not take them into the next income bracket or for business owners where entrepreneurs relief is available), 18% (for basic rate income tax payers making small gains on residential property), 20% (for all other gains except residential property gains for higher and additional rate tax payers or those pushed into this bracket by their gains) and 28% (for disposals of residential property by higher or additional rate tax payers).
The annual exemption is expected to remain at this level until 2026.
Despite hopes of reform and simplification, IHT remains unchanged for another year. It’s now 11 years since the nil rate band was last increased and this remains stagnant at £325,000.
The residential property nil rate band was due to increase with inflation but this has been frozen at £175,000 for another year.
Likewise, there have been no changes in the amount you can give away tax free each year (£3,000 annual allowance, £250 small gifts, gifts of genuinely surplus income and gifts on marriage).
The registration point for VAT remains at £85,000 of taxable turnover in a rolling 12-month period.
This remains at 19% until April 2023 but thereafter companies earning more than £50,000 in profit will pay additional amounts, up to 25% for those earning over £250,000.
This is a helpful link for rates and thresholds for employers: www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022.
In addition, the pension auto enrolment contributions remain at a 3% minimum, the annual investment allowance remains capped at £1m, the apprentice hiring incentive remains at £3,000, a super deduction of 130% has been introduced for investment, rates relief continues for many eligible businesses throughout 2021/2022 and various recovery loans and restart grants are available for businesses.
Stamp Duty Land Tax
The SDLT holiday continues until 30th June 2021. Thereafter, the nil rate band is reduced to £250,000 until the 31st September when it will revert back to £125,000.
For advice on how the above may impact you or your business please contact Michael Culver.