Budget 2021

The UK government announced at the Budget 2021 the following subject matters and will legislate them in Finance Bill 2021.

Corporation tax

The corporation tax rate remains at 19% from 1 April 2022 and the rate will increase to 25% from 1 April 2023.

Coronavirus Job Support Scheme

The Coronavirus Job support Scheme is extended to 30 September 2021 across the UK.

Self Employment Income Support Scheme

The self-employment income support scheme is extended to 30 September 2021. People who have filed their self-assessment return in 2019/2020 may be able to claim for the first time.

One-off cash grants of £18,000

A new restart grants for hospitality, accommodation, leisure, personal care and gym businesses in England. If your business falls into these sectors you may entitle to the one-off cash grants of £18,000.

VAT cut for some businesses

VAT to 5% for hospitality, accommodation and attractions is extended to 30 September 2021 thereafter the rate will increase to 12.5% till 31 March 2022.

Statutory Sick Pay (SSP)

If your business have paid staff for self isolating or sick during this pandemic, you can claim the statutory sick pay up to two weeks from the UK government.

Property tax – stamp duty

The stamp duty land tax temporary relief is extended to 30 June 2021. First-time buyers continue to enjoy the tax-free amount of up to £500,000 on a property purchase cost.

The Budget 2021 have been very helpful to help UK businesses to bounce back from this pandemic.

UK income tax rates 2021/2022

Below is the UK income tax rates 2021/2022 to help you to calculate your income tax liability. Your self-assessment period is from 6 April to 5 April and you must deliver your self-assessment return to HMRC by 31 January each year.

England, Wales and Northern Ireland Income tax rates 2021/2022

BANDTAXABLE INCOMETAX RATE
Personal Allowanceup to £12,570 per year0%
Basic rate£12,570 to £37,70020%
Higher rate£37,701 to £150,00040%
Additional rate over£150,00045%
Source: GOV.UK

Scotland Income tax rates 2021/2022

BANDTAXABLE INCOMETAX RATE
Personal AllowanceUp to £12,5700%
Starter rateOn annual earning above the PAYE tax threshold and up to £2,09719%
Basic rateon annual earnings from £2,098 to £12,72620%
Intermediate rate£12,727 to £31,09221%
Higher rate£31,093 to £150,00041%
Top rateabove £150,00046%
Source: GOV.UK

Self-employed through a limited company

If you are self-employed individual trading through a limited company and you withdraw money from your company through salary and dividend payment, your salary and dividend amount enter in your self-assessment return form must agree to your signed and dated company accounts and corporation tax return filed with HMRC.

Your total salary for the tax year can also be obtained from your P60 form.

Take note that corporation tax rates 2020/2022 are not the same as the UK income tax rates 2021/2022.

In addition to the above, there is another important document you must submit to Companies House for your limited company that is your confirmation statement.

If you require help with your company accounts, corporation tax return, self-assessment return and confirmation statement filings, feel free to contact our accountants and they will be more than happy to help you.

File a VAT return under the Annual Accounting Scheme

There are special rules that apply to file a VAT return under the VAT Annual Accounting Scheme. This VAT Annual Accounting Scheme is suitable for businesses with a turnover of up to £1.35 million. If your turnover has exceeded this threshold, your business can stay in the scheme as long as your turnover does not go over £1.6 million significantly. Thereafter, your business must leave the scheme at the end of the annual accounting VAT Return year.

Even though you only require to file a VAT return under the Annual Accounting Scheme, you must pay your VAT by instalments. You can choose to pay quarterly or 9 monthly. You estimate the amount of VAT you expected to owe to HMRC at the end of your Annual Accounting VAT return period. Your VAT instalment payments must be paid by Direct Debit, Standing Order, bank transfer or by BACS.

Under this scheme, you complete your VAT return in the normal way for the VAT period.

How to complete and file a VAT Return under the Annual Accounting Scheme

Box 1VAT due in this period on Sales£100,000.00
Box 2VAT due in this period on EC acquisitions£0.00
Box 3Total VAT due (the sum of Boxes 1 and 2)£100,000.00
Box 4VAT reclaimed in this period on purchases£45,345.00
Box 5Net VAT to be paid to Customs or reclaimed by you (Difference between Boxes 3 and 4)£54,655.00
Box 6Total value of sales, excluding VAT£500,000
Box 7Total Value of purchases, excluding VAT£226,725
Box 8Total value of EC sales, excluding VAT£0.00
Box 9Total value of EC purchases, excluding VAT£0.00
Source: GOV.UK

How to fill in each box is explained

You will fill in Box 1 to Box 9 as you would normally do under the Standard VAT scheme except for Box 5.

BOX 5 – Do not deduct any instalments you paid to HMRC from net VAT to be paid to HMRC.

Say, you choose to pay your VAT instalments in 9 months at £6000 per month. You do not deduct £54,000 already paid to HMRC from £54,655. Instead, you file your annual accounting VAT return and the balance of the payment owed to HMRC of £655.

Companies House filings

Besides, maintaining good VAT accounting records and submitting your VAT return on time to HMRC, if your VAT registered business is a limited company, you must also deliver your company accounts and confirmation statement to Companies House promptly.

If you require any help with your VAT returns, company accounts and confirmation statement filing, feel free to contact our accountants, they will be more than happy to assist you to comply with your filing requirements.

Submit VAT return under Cash Accounting Scheme

There are special rules that apply to submit a VAT return under the VAT Cash Accounting Scheme. This VAT Cash Accounting Scheme is suitable for small businesses with sales of up to £1.35 million or below. If your sales have exceeded this threshold, your business must leave this scheme.

Under this scheme, you calculate your VAT on a cash basis. In other words, you only pay VAT on sales to HMRC when your customers paid you. Correspondingly, you only reclaim VAT on purchases when you actually settled your supplier’s invoice.

In short, you account for your VAT on the basis of payments received and payments made, rather than based on invoices issue and receive. In accounting world, the latter often referred to as accruals basis.

How to complete and submit the VAT Return under the Flat Rate Scheme

Box 1VAT due in this period on Sales£8,333.33
Box 2VAT due in this period on EC acquisitions£0.00
Box 3Total VAT due (the sum of Boxes 1 and 2)£8333,33
Box 4VAT reclaimed in this period on purchases£1000.00
Box 5Net VAT to be paid to Customs or reclaimed by you (Difference between Boxes 3 and 4)£7,333.33
Box 6Total value of salesexcluding VAT£41,667
Box 7Total Value of purchases, excluding VAT£5,000
Box 8Total value of EC sales, excluding VAT£0.00
Box 9Total value of EC purchases, excluding VAT£0.00
Source: GOV.UK

How to fill in each box is explained

Box 1 – You enter total sales, excluding VAT, of sales invoices already settled by your customers only. For example, you received £50,000 from your customers inclusive of VAT. The VAT rate is 20%. Your net sales are £41,666.67 and VAT on sales are £8,333.33. You leave out unpaid sales invoices issued.

Box 4 – You enter VAT on purchases you had paid not received. For example, if you receive a rent invoice of £5,000 + VAT of £1000 and you have not yet paid this invoice in this VAT return period, in this case, you leave out this invoice until you have paid it.

Box 6 – You enter your total sales excluding VAT in this box. Your sales figure in this box also to include EC sales.

Box 7 – You enter your total purchases invoices paid. excluding VAT in the box 7. Your purchases figure in this box also to include EC purchases.

Companies House filings

Besides, maintaining good VAT accounting records and submitting your VAT return on time to HMRC, if your VAT registered business is a limited company, you must also deliver your company accounts and confirmation statement to Companies House promptly.

If you require any help with your VAT returns, company accounts and confirmation statement filing, feel free to contact our accountants, they will be more than happy to assist you to comply with your filing requirements.

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