The tax year ending 5 April 2021 has been a difficult time for all including small businesses. The new tax year, stated 6 April 2021 and brings in the new personal and business allowances for the next 12 months.
We've highlighted and summarised the main changes below:
The amount at which an individual can earn before paying income tax has risen to £12,750. Individuals will pay income tax at a rate of 20% until they earn over £50,270. Finally, the 45% threshold remains the same at earnings over 45%. These thresholds will not change until 2026!
As a director and shareholder of a small company we recommend paying yourself a salary of £8,840 and dividends up to a £41,430. Any dividends above this amount will be taxed at the higher rate of 32.5%.
Of course, all small business owners are different and its important to get advice tailored to your own circumstances.
The dividend allowances stays at £2,000. Basic rate payers will pay 7.5%, higher rate 32.5% and additional rate at 38.1% income tax on dividends earned during the tax year.
National minimum wage has increased to £8.91 from 1 April 2021.
Individuals can still contribute £40,000 into their pension for the year ending 5 April 2022 and the lifetime allowance remains at £1,073,100.
For the year ending 5 April 2022 the CT rate remains at 19%. However from April 2023 the CT rate will rise to 25% with a small profits rate of 19% for companies with profits of less than £50,000.
To encourage businesses to invest the Chancellor has provided a super deduction against profits of 130% on qualifying expenditure. For more information on qualifying expenditure, read our article on the super deduction.
Recovery Loan Scheme
From April 2021 specific lenders will receive an 80% guarantee on all eligible loans between £25,000 and £10m. For more information on if your business qualifies, read our article on the recovery loan scheme.
Kala Atkinson are a firm of Chartered Accountants based in East London.
We have over 30 years experience in helping individuals and small businesses navigate their compliance whilst providing the financial tools in order to grow.
For more information on how we can help you and your small business contact us today.