April 2021: Tax changes and lockdown easing

Self-Assessment Tax Returns for the tax year ending 5th April 2021 can be completed from 6th April onwards, with the final deadline for submission to HM Revenue & Customs (HMRC) being 31st January 2022. Clients are advised to provide us with details of their relevant taxable income for the period 6th April 2020 - 5th April 2021 as soon as possible, to enable early completion & submission to HMRC of their Tax Returns. This will also enable us to provide clients with details of their 2021-22 Income Tax & NIC liabilities well ahead of the payment deadline at the end of January 2022.

April 6th is also the start of the new 2021-22 tax year and this date is closely followed on April 12th by the easing of many lockdown restrictions in England, with non-essential shops re-opening, along with outdoor hospitality, personal care businesses, indoor gyms & leisure facilities and self-contained accommodation (restricted to individual households). Restrictions in other nations of the UK will ease in line with the advice and guidelines of the devolved Governments.

Tax changes that will come in from the start of the new tax year include the extension of the basic personal Income Tax allowance to £12,570. This means that you can earn an extra £70 without paying any Income Tax.

The National Insurance threshold for employed workers will also increase by 0.5%, from £9,500 to £9,568. This means employed workers can earn £68 more in 2021-22 before NI contributions start to be deducted.

Class 2 weekly NI contributions for self-employed workers have been frozen at the 2020-21 rate of £3.05 per week.

The National Minimum Wage (also known as the National Living Wage) rises in April 2021 to £8.91 per hour. This increased rate now also includes workers aged 23 & 24, whereas this highest rate only previously applied to workers aged 25 or over. Workers aged 21-22 must now receive a minimum of £8.36 per hour, with those aged 18-20 receiving a minimum of £6.56 per hour. Workers aged under 18 must receive a minimum of £4.62 per hour.

The Government-backed CBILS and Bounce Back Loans were withdrawn at the end of March, to be replaced from 6 April with the Recovery Loan Scheme, which will provide lenders with a guarantee of 80% on eligible loans between £25,000 - £10 million.

The planned changes for off-payroll working (IR35), which were originally intended to be introduced for the private sector in April 2020, will commence in April 2021 and those working in the Construction Industry Scheme (CIS) need to consider how they might be impacted. The off-payroll rules take preference over the CIS rules. Under this new legislation, medium and large companies will be required to assess if contractors providing services through personal service companies (PSCs) would be classed as employees if they were engaged directly. Where this would be the case, the fee payer of the services will have to deduct PAYE tax and National Insurance (NI) on the payments made to the PSCs. If the company is classed as small, then it should be exempt from the planned changes, but may need to provide supporting evidence of this.

Government support continues to be provided to those businesses affected by the Covid-19 restrictions.

The Coronavirus Job Retention Scheme (CJRS) has been extended through to the end of September 2021, meaning that employers can still claim furlough wages for employees who have yet to return to work or those who are continuing to work reduced hours. Employees will continue to be paid 80% of their salary for any hours not worked. No contributions are required from employers through to the end of June 2021, but employers will then have to contribute 10% [of the 80% salaries] in July, with the employer contribution increasing to 20% in August and September.

The Self-Employment Income Support Scheme (SEISS) will provide a fourth grant, covering the period February - April 2021. This grant can be claimed from late April and will provide 80% of average trading profits, up to a capped amount of £7,500. A fifth and final grant, covering the period May - September 2021, will be available to claim from late July.

The temporary reduced rate of 5% VAT for goods and services supplied by the hospitality sector is extended until 30 September 2021. A 12.5% rate will apply for the subsequent six months until 31 March 2022, when the VAT rate will then revert back to the standard 20%.

Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1 April 2021 to 30 June 2021, followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022. This will be capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

The temporary increase in the residential SDLT Nil Rate Band to £500,000 in England has been extended through to 30 June 2021. From 1 July 2021, the Nil Rate Band will reduce to £250,000 until 30 September 2021, before returning to £125,000 on 1 October 2021.