2021 : Planning for tax changes
Let’s face it, all tax planning went out the window in 2020, with literally a new announcement weekly from the Treasury on tax changes. What will 2021 bring in terms of tax changes that you can prepare for? let’s take a look at what we can plan for now.
Self Assessment Tax Return Season
No changes here. The deadline to complete your personal self assessment tax return is 31 January 2021, and penalties for late submission will be given as usual. The additional support on late submissions from HMRC allow for appeals to be made up to 90 days after the deadline, instead of the usual 30 days.
If HMRC agree you have a reasonable excuse, they will cancel the late filing penalty. Coronavirus can be a reasonable excuse if you can explain how the pandemic affected your ability to file on time.
The good news is that you have the option to pay any tax liability due on 31 January in installments if you are facing cash flow issues.
On submission of your tax return for 19/20, you can log into your personal government gateway account and request payment of up to 12 instalments online, without having to give HMRC a call to arrange. Please see more details here on eligibility.
The Self Employment income SUpport Scheme (SEISS) deadline
If you are eligible, you can apply for the third SEISS grant before midnight on Friday 29 January 2021, and this will be based on your average annual profits for the tax years 2016/17 to 2018/19.
Sunak promised a fourth SEISS grant to cover three months from February to April 2021. It could be that if you file a tax return for 19/20 you may be eligible for the fourth SEISS grant; we await further details from the government.
Coronavirus support ends
In December, the Chancellor extended the coronavirus job support scheme, otherwise known as the furlough scheme, to 30 April 2021 to support workers in jobs.
It remains to be seen if the furlough scheme will continue beyond this date.
The Spring Budget - planned for the 3 March 2020
The first Budget in 2021 will be presented by our Chancellor, Rishi Sunak, on 3 March 2021, and we will provide commentary on the day.
Sunak vowed at the Conservative Party conference in October 2020 that he will plan for tax hikes to balance the books post pandemic, but this is unlikely to happen to after the general 2024 election.
At this point, a review of VAT, income tax and National Insurance is on the cards.
Former Chancellor, Philip Hammond, suggested that Sunak will seek to raise taxes to pay for the Covid-19 business support schemes in two stages. The first set of tax increases, he believes, will happen before the general election and will target corporations, foreigners in the UK and wealthy individuals.
Finance Act 2021
After the Spring Budget, the Finance Bill is be pushed through Parliament with the usual in-depth scrutiny, to be passed as Finance Act 2021. Hot topics to watch out for:
Making Tax Digital (MTD), moving tax reporting online quarterly, will be extended to corporation tax and partnerships
Changes to the construction industry scheme
Measures to tackle promotors of tax avoidance
Expanding HMRC powers
Changes to due dates for tax payments
Off-payroll working or IR35 regulations
The revised version of the IR35 rules will come into force on 6 April 2021, for private sector contractors. From this date, there will be three different sets of IR35 rules in place for:
Public sector contracts
Private sector contracts with large and medium sized engagers
Private sector contracts with small engagers
Local elections
As the 2020 local elections were postponed to 2021, there will be the largest number of local and mayoral elections taking place on 6th May. There are also elections for police and crime commissioners, the London Assembly, the Scottish and Welsh Parliaments.
In combination, the government will receive clear messaging from the people on their management of the country so far.
Anything else?
All of the above takes us up to the summer. Post summer, there is very likely to be an Autumn Budget and many other tax surprises.
2021 promises to be another interesting year if you are a business owner, hold on to your hats, it’s sure to be a bumpy ride!
