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Ready for 2021? Tax and accounting changes businesses should prepare for

Posted by
Rouse Partners
11.12.2020

Whilst we can’t foresee all the tax and accounting changes that might present themselves in 2021, there are several which businesses can not only expect, but can plan ahead for. Here, we take a brief look at these.

1 January 2021 (with further changes from 1 July)
Changes for VAT and customs duty reporting

Following the end of the Brexit transition period, there will be changes for businesses who move goods between the UK and EU, which may involve customs declarations, customs duties and VAT on imports, and safety and security declarations. You can see our summary of these changes here.

1 January 2021 (with further changes from 1 July)
Changes for online selling

There will be changes for UK businesses who sell to customers in EU or non-EU countries via online marketplaces or via e-commerce websites. You can see our summary of these changes here.

1 January 2021
Removal of audit exemption for groups with EU parents

If a company currently takes exemption from audit under s.479A with the guarantee being provided by an EU parent, from 1 January 2021 it will no longer be able to take advantage of that exemption and will require an audit. There will also be changes for groups headed by or containing an entity listed on an EU regulated markets who currently benefit from accounting, audit and filing exemptions. See further details on these financial reporting changes here.

31 January 2021
Self assessments deadline

The deadline for submitting 2019/20 self assessment returns (with a £100 automatic penalty for late filing). Taxpayers are able to defer their January tax bills (and those previously deferred from July 2020) until January 2022, with the option of repaying in 12 monthly instalments, but must apply for this option. See further details of how to apply here.

1 March 2021
VAT reverse charge to be introduced

It has been delayed twice previously, but if it is launched in March as expected, it will be a significant change for construction firms and suppliers in the industry. You can find our summary and guidance here.

3 March 2020
The Spring Budget

Given the level of government spending in recent months, the Spring Budget on 3 March 2021 may signal tax changes and rate increases with effect from April. Will these be applied widely in the personal or corporate arenas, or targeted within the long rumoured tightening of CGT and IHT regimes? This will become clearer in the Spring.

What we do already know, is that from the new tax year (6 April 2021), income tax allowances and thresholds and national insurance limits will increase in line with the September CPI figure of 0.5%, which is the minimum required by legislation. Therefore, the personal allowance for 2021/22 should be £12,570 (up from £12,500 in 2020/21) and the basic rate limit for 2021/22 should be £37,700 (up from £37,500 in 2020/21). Meanwhile, the National Insurance limits and thresholds for 2021/22 will also follow the September CPI figure increases.

End of March 2021
Coronavirus loan schemes to close for new applications

As it stands, the deadline for new applications under the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBIS) is the end of March 2021. You can see further details on these schemes and eligibility via our main Coronavirus support page here.

1 April 2021
Minimum Wage increase

The government has announced that the National Living Wage (NLW) will increase by 2.2% from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time. The National Minimum Wage (NMW) will also increase as below.

  • NLW rate change: For workers aged 23+ (from £8.72 to £8.91 per hour)
  • NMW rate changes: For workers aged 21–22 (from £8.20 to £8.36 per hour), workers aged 18–20 (from £6.45 to £6.56 per hour), workers aged 16–17 (from £4.55 to £4.62 per hour) and apprentice rate (from £4.15 to £4.30 per hour)

6 April 2021
IR35 reform

Originally set to be introduced in April 2020, but delayed as businesses grappled with the Coronavirus crisis, the reformed IR35 rules shift the responsibility for determining the tax status of a contractor from the worker to the hiring organisation (for those classed as medium or large). Those workers who fall inside of IR35 will be required to have PAYE and National Insurance Contributions (NICs) deducted at source from their income. The ‘fee-payer’ (usually the recruiting agency or end client depending on the contractual chain) will be responsible for deducting the relevant tax and NICs on behalf of the worker, prior to paying them.

For agencies and hiring organisations, it is important to take steps to understand your contractor workforce from an IR35 perspective and how you will manage these changes when they come into effect from April.

End of April 2021
Job Retention Scheme set to close

As it currently stands, from the end of April, support under the Coronavirus Job Retention Scheme will be withdrawn for workers not able to carry out their usual duties. There are also no further grants planned under the scheme for the self-employed. We may see some form of incentive launched for employers keeping staff on after this period (in keeping with the previously withdrawn £1,000 bonus per employee), but this has not yet been announced.

Contact us

If you are looking for a proactive team of accountants and tax advisors for your business, please do contact us to discuss how we can assist you in 2021 and beyond.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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