The impact of the COVID-19 pandemic has presented the UK with some major challenges. The repercussions of the pandemic continue to unfold as the economy gradually begins to recover. Over the past 15 months, the government has introduced a range of financial support initiatives to help businesses, which have been already been covered extensively in a range of DRG articles, so these more temporary measures will not be included in these tax and financial planning strategy pages.
This section on tax and financial planning includes separate detailed pages on personal tax, business tax, business and employment, business exit strategies, personal and family strategies and tax efficient estate planning. They are a general overview - and should you have any further questions about you and your personal circumstances, please do seek professional advice.
Budget 2021- the big freeze
In the 2021 Budget, there were no dramatic announcements relating to personal taxes, capital taxes and pensions. However, the Budget freeze for a number of rates and allowances until 5th April 2026 will have an impact on many people.
The UK-wide personal allowance has been increased, and rose to £12,570 from 6 April 2021. The basic rate band also increased to £37,700. This means the higher rate threshold – the point at which you start paying higher, rather than basic rate tax in England, Wales and Northern Ireland – increased to £50,270 (if you have a full personal allowance).
But after this date, the personal allowance and higher rate threshold won’t change until 5 April 2026. As incomes rise, this brings more people within the tax net, and pushes some basic and higher rate taxpayers into the higher and additional rate bands. 1.3 million people, in fact, according to government figures, should come into income tax by 2025/26, and one million into higher rates of tax. From the 2026/27 tax year, starting 6 April 2026, the personal allowance and basic rate limit are indexed with the Consumer Price Index by default.
Scottish taxpayers: for Scottish taxpayers, income tax rates and bands for non-savings and non-dividend income are different from the rest of the UK: see Personal Tax Essentials later in this guide. The freeze to the personal allowance impacts Scotland, although the freeze to the UK higher rate threshold only affects those with savings and dividend income.
Big change to inheritance tax postponed?
There’s been much discussion of a major tax overhaul, with inheritance tax, capital gains tax and pensions contenders for a makeover. It didn’t happen on Budget day, nor the UK’s first ‘Tax Day’, which was the publication day for a raft of tax consultations. What Tax Day did produce was a commitment to reduce red tape for inheritance tax, so that from 1 January 2022, over 90% of non-taxpaying estates should not need to complete inheritance tax forms for deaths when probate or confirmation is required.
Off-payroll working in the private sector
From 6 April 2021 new tax rules apply for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.
The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and national insurance contributions (NICs) and pay any employer NICs where the worker is deemed to be caught by the rules.
Plant and machinery – super-deduction
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances. Under this measure a company will be allowed to claim:
- A super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- A first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
This relief is not available for unincorporated businesses.
Tax and Financial Strategies 2021-2022 in detail
For further information, please take a look at our more detailed Tax and Financial Strategies 2021-2022 website pages
Personal tax essentials
Business tax strategies
Tax and employment
Business exit strategies
Personal and family financial strategies
Retirement planning strategies
Savings and investment strategies
Tax-efficient estate planning
Your financial planning strategy
It is important to have a robust business and personal financial planning strategy in place, to help ensure that you and your family are financially secure and to achieve your long-term goals. For a review, please do get in touch with the team at DRG Chartered Accountants. We would be very pleased to hear from you.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.