New legislation is coming in the 2021-22 tax year which will impact the way employees are paid and taxes are processed. Some of these changes have previously been postponed due to the impact of COVID-19, meaning businesses have plenty to prepare for ahead of 6 April 2021.
Not only this, but experts are predicting further tax hikes in 2021 to recuperate losses made through pay-outs during the coronavirus pandemic, including business grants and furlough payments.
In this article, we’ve covered the major changes that will commence in spring 2021. Plus, we’ve provided a useful tax calendar for the new tax year. This article will be updated with any further changes.
Tax calendar 2021 to 2022
Prepare for the tax year ahead with our handy month-by-month calendar. Click here to download a PDF version.
Upcoming payroll and accounting changes for 2021-2022 tax
Last updated 12/03/2021
- The furlough scheme that has supported many workers throughout the COVID-19 pandemic will end in September 2021. Employees under the scheme receive 80% of their pay up to £2,500 – while employers may choose to top this up. In July, employers will be expected to contribute 10%, increasing to 20% in August and September.
- IR35 off-payroll legislation comes into effect in the private sector from April 2021 – here’s everything you need to know about it. This change will impact contractors and the amount of tax they pay and is being put in place to prevent attempts to reap the tax benefits of limited companies without being registered as such.
- From April 2021, National Living Wage will increase by 2.2% from £8.72 to £8.91– and this will also include 23 and 24-year-olds for the first time.
- The VAT domestic reverse charge will apply for some businesses operating in the construction industry from April 2021. This change aims to prevent VAT avoidance by switching the responsibility of paying VAT for work and materials to the customer.
- Making Tax Digital Phase 2 will commence from April 2021. This will change the way businesses are required to process VAT returns, ensuring the process used is completely connected digitally. Read all about MTD phase 2 in our comprehensive guide.
- HMRC has announced the following updates to student loan thresholds:
- From April 2021, the repayment threshold for pre-2012 (Plan 1) loans will rise to £19,895, while the threshold for post-2012 (Plan 2) loans will rise to £27,295.
- From April 2021, the basic rate Personal Allowance threshold will rise to £12,570, while the higher rate threshold will rise to £50,270. The National Insurance primary threshold will rise to £9,568, while the upper earnings limit will rise to £50,270 and be frozen until April 2026.
