What you can expect from the 2021/2022 Tax Year
Happy New (Tax) Year!
The new Tax Year begins on 6 April 2021 in the UK. So what exactly does that mean for your business? In simple terms, it’s the time of year for you to begin anew (with regards to your accounts monitoring) and start to prepare your Self-Assessment Tax Return for the previous 12 months.
The Tax Year in the UK runs from 6 April to 5 April inclusive. For this new year, it’s back to the usual timings (after HMRC gave us an extra month this year due to COVID-19).
Your Tax Return is due by 31 January 2022.
What’s different about the 2021/2022 Tax Year?
It’s been a turbulent year. That goes without saying. The COVID-19 pandemic has had a huge effect on all aspects of life, of course including the realm of Tax. Perhaps most notably, we’ve seen furlough leave implemented for employees affected by closures and decreased demand. It’s been, dare I say it, unprecedented.
But what’s different this year? Here are some of the most important aspects that are likely to affect you:
- Tax Thresholds.
We’re seeing a slight rise in the thresholds before Tax applies to earnings, increasing from £12,500pa to £12,570pa. This will be frozen for the next 5 years (until 2026), meaning that many people will now become Tax payers. The standard rates of Tax, National Insurance and VAT remain unchanged.
- Minimum/Living Wage.
The National Minimum Wage is the minimum amount most workers are entitled to earn per hour. This will increase from £8.72ph (for ages 23+) to £8.91ph. The latter figure is also the living wage. We’ll see small rises in other age groups, too.
Gov.uk has a handy Minimum Wage Calculator so you can ensure you’re on track.
- Furlough Scheme.
Officially titled the Coronavirus Job Retention Scheme (CJRS), furlough became a household term in 2020. For those unaware, it covers 80% of an employee’s earnings if their job has been affected by COVID-19. It began as a minimum of 3 weeks off at a time, but has since become more flexible to accommodate those who are able to work part of their contracted hours. We’ve had confirmation that this has been extended until September 2021 – great news for those affected.
- Self-Employed Income Support Scheme (SEISS).
The current SEISS is the fourth iteration of this grant. It is available for those trading in both 2019-2020 and 2020-2021 Tax years and offers a taxable grant of 80% of 3 months’ average trading profits, capped at £7,500. It has also been extended until September 2021.
- Hospitality Industry’s VAT Rate.
The VAT rate for the hospitality sector remains reduced at 5% until September 2021. It’ll then increase to an interim rate of 12.5% (expected until 31 March 2022), before being restored at the full 20% from April 1st 2022. Sadly, it’s unlikely to be an elaborate April Fool’s prank!
- Corporation Tax.
Corporation Tax remains unchanged for most smaller businesses. But larger businesses will see an increase to their payments. Please contact us if you are affected.
Accounting seems to come with its own language, doesn’t it? Terms and phrases that make perfect sense to us may be about as clear as mud to you. That’s why we prefer to use plain English when talking to you. We’ll all have a far better experience if you can understand what we’re on about!
Before we go further, let’s clarify a few commonly used terms:
- Sole Trader
Someone who is in business, working for themselves, and not working with others in a Partnership or as a Limited Company.
- Year End
Your business’ Year End may be, say, 31 October, or another date of your choosing, which may not coincide with the Tax Year.
If this is the case, the Tax Return you submit from 6 April 2021 will include the trading figures that fall within your own Year End. So if your trading Year End is 31 October 2020, then you will report those trading figures on your Tax Return for this year.
- Taxable Profits
These are not always the profits you see on your accounts. Sometimes adjustments need to be made for buying expensive new equipment or for the private use of your vehicle, for example.
- Balance Sheet
Although not always needed by smaller businesses, this provides a useful snapshot of what you own and what you owe. It shows how healthy your business is.
When do you need an accountant?
You may be thinking, “When do I need an accountant?” It’s a fair question, particularly if you’re new to the world of business ownership. We’d suggest that the moment the business idea comes to you, contact an accountant. At this early stage we can advise of any pitfalls and give you helpful pointers, including expected profits and cashflow management.
You’ll certainly need to get in touch once you start trading. It’s shocking how many new businesses find themselves in trouble with HM Revenue & Customs (HMRC) as they’re unaware exactly what is expected of them.
We’re here to help you to make the most of your money and keep you out of trouble.
Help us to help you by speaking to us early on.
This time of year:
You should start to collect your trading information together in order to submit your Tax Return as early as possible. You’ll need to gather information on your sales, expenses and any relevant paperwork (receipts, invoices, purchase orders, etc.)
31 January 2022 sounds a long way off, but time passes at frightening speed. It’s a great feeling to get this ticked off your list early.
Remember – your payment will be due 31 January 2022 regardless of how early you submit your Return. You still have time to budget ahead.
We now begin to make sure everything is in order to complete and submit your Tax Return. We also find potential problems that need ironing out to avoid delays.
Times are changing
The role of an accountant is evolving. We’re finding more and more that we are working in an advisory capacity, providing you with help and information around budgeting, forecasting, predicting cashflow and business expansion.
At Minerva Accounting Solutions Ltd, we’ve introduced cloud-based software and apps to help you. This is fantastic as it speeds up your transaction recording and gives you access to your accounts in real time. It helps to cut down on the amount of paper you have to use and keep, and means we can give you even more expert advice. We will happily talk you through which ones are best suited to your business.
We tailor your service to you. Whether you need Year End and Tax Return help, or the whole shebang – we’re here for you.
We took our own advice!
We took our own advice! Moving our systems online reduced our paper usage massively overnight. Thanks to flippin’ COVID-19 we worked from home from mid-2020 and the world did not end! So, we left our beloved office at Teignbridge Business Centre (thank you, Alex, for your support) and set ourselves up permanently from home.
Although it’s a bit more difficult for a drop-in, we’re very happy to come to you when it’s convenient (so put the kettle on!)
Need a hand with your accounts? Invest a little time now to save heartache later. Contact us now for a no obligation chat.