We are sure you’re aware that a new tax year started on 6th April and that it bought with it a number of changes which could have a direct impact on both your personal and business finances.
As a local accountant, we just wanted to reiterate some of the key updates we’ve seen this year. This includes changes to both basic rate on income tax as well as to the National Living Wage and National Minimum Wage.
Read on to find out how these changes could affect your personal and business finances. And if you do need any help, please get in touch. At Palmers, we love to help ambitious business owners grow their business.
For the 2021/22 tax year, the amount you can earn before paying any Income Tax has increased to £12,570. If you’re paying the Higher Rate of Income Tax, the threshold has increased to £50,270.
These thresholds are now frozen until 2026.
|Basic rate tax||20% on income between £12,571 and £50,270||20% on income between £12,501 and £50,000|
|Higher rate tax||40% on income between £50,271 and £150,000||40% on income between £50,001 and £150,000|
|Additional rate tax|
45% on income above £150,000
45% on income above £150,000
This year National Insurances thresholds have increased by 0.5% in line with Consumer Price Inflation. This means you will earn an extra £68 before any National Insurance payments need to be made.
How much you earn
Class 1 rate
Less than £9,568
More than £50,270
If you are self-employed, you will have to pay Class 2 weekly contributions, but these rates have also been frozen. This means you’ll take home more money before you will have to pay any National Insurance contributions.
As with the personal tax allowance, these thresholds are now frozen until 2026.
Each year the government reviews the minimum wage rates and usually updates them in April. This year has seen hourly rates increase for both the National Minimum Wage and National Living age. In addition, the age band for the National Living Wage has been lowered from 25 years to 23 years. As a result, anyone who is 23-24 will see an increase in their pay.
Current rates for 2021/22 tax year
Current hourly rates
23 and over (National Living Wage)
21 to 22
18 to 20
If you’re a company director of your own limited company, you will already know that the most tax efficient way to pay yourself is to pay yourself a minimal director’s salary and then take the rest of your pay in dividend payments.
The tax-free Dividend Allowance remains at £2,000 for the 2021/22 tax year and there are no changes to the dividend tax rates.
If you need any advice on the most tax efficient way to pay yourself (whether you’re a director or sole trader), please get in touch. Every situation is different, and as experienced local accountants who provide a range of accountancy services and essential business services to clients of all sizes, we’ll be happy to provide you with some expert advice.
There has been a lot of talk about Corporation Tax changing, but for the 2021/22 tax year, it remains at 19%.
A rise in Corporation Tax to 25% will take effect from April 2023, but will only apply to businesses with profits over £250,000. The government will also be introducing a ‘small profits rate’ of 19% for companies with profits of less than £50,000. There will then be a tapered increase introduced to this rate as profits increase.
Planning ahead for this change is worthwhile, so if you would like some advice, please give us a call and one of the Palmer’s team will be happy to talk through how you can reduce your Corporation Tax bill.
The pandemic has seen the amount of business investment fall dramatically, which has prompted the government to introduce a new “super-deduction” capital allowance. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery will be able to claim:
Under the super-deduction, companies will be able to cut their tax bill by up to 25 pence for every £1 they invest.
As an example, if a company spends £1m on qualifying plant and machinery and decides to claim the super-deduction, the company can deduct £1.3m (130% of the initial investment) from its taxable profits. This could end up saving the company up to 19% of that – or £247,000 – on its corporation tax bill!
By making capital allowances more generous, the government is hoping it will stimulate business investment and promote economic growth.
If you are planning on claiming capital allowances, most tangible capital assets used in the course of a business are considered to be production plant and machinery.This could include:
If you’re not sure you can claim, please get in contact and we will be happy to offer you some expert advice.
If you’re at unsure about what these changes mean for you or your business, please get in touch.
At Palmers Business Support, we work closely with our clients to make sure they are supported with the essential information needed for HMRC, as well as ensuring they pay as little tax as possible. And don’t forget, that we don’t just offer accountancy services, but also an extensive range of services including business advice to help ambitious business owners grow their wealth and achieve their ideal work/life balance.
We help ambitous small business owners grow their personal wealth and achieve their ideal work/life balance.
267 3184 85
Palmers Business Support was founded to help ambitous small business owners grow their personal wealth and achieve their ideal work/life balance. With accountancy as the central pillar of our offering, we take the view that timely accounts and efficient compliance is the bare minimum our cients should expect.