Following the announcement of the approval of the Finance Bill 2021 by the UK Parliament it is now worth explaining all the changes that will take place from 6th April 2021 and that will have an impact on people’s fiscal regimes in the UK:
- There will not be any changes in the tax-free threshold on personal income during the tax year 2021/22, however, the latter will increase, together with the basic income threshold, starting from the tax year 2022-23. Moreover, the Personal Allowance will increase to £12,570 whereas the Basic Rate earing threshold will be taxed 20% on profits up to £37,700. As a result, the higher rate tax band will start from £50,270.01;
- Any financial support devolved to potential victims of modern slavery and human traffic will be exempted from income tax;
- Payments received from Covid-19 financial support measures by Working household which also receive tax credits will be exempted from income tax during the year 2021-22. It is worth specifying that Working Households are those family’s members which have no less than 16 years and are under full employment.
- There will be tax adjustments for those individuals who have received more Self-Employment Income Support grants than what they were supposed to or that have kept receiving these regardless of their ineligibility. For this purpose, HMRC will be allowed to recover those founds by increasing taxes on those individuals or by requesting the money back. Furthermore, more powers will be awarded to the Treasury in order to pass laws that will sanction and condemn those individuals who have abused of the Self-Employment Income Support.
- There were no announcements regarding changes to the Inheritance Tax, therefore the nil-rate band and the residence nil-rate band will continue at £325,000 and at£175,000 respectively. The residence nil-rate band taper will stay unchanged, starting at £2 million. In other words, the eligible estates will keep having a threshold of £500,000 and those of a surviving spouse or civil partner will be exempted from paying inheritance tax up to £1 million.
- Fluctuations of the Consumer Price Index will no longer be linked to an increase of the lifetime allowance. Therefore, the maximum amount of tax relieved pension savings that an individual can build up over their lifetime =will be retained at £1,073,100 until the fiscal year 2025-26.
- The Social Investment Tax Relief scheme will be extended from April 2021 to April 2023. This will allow individuals that have invested in business activities that are recognised as social to continue receiving tax reliefs on personal income and capital gains.
Capital Gain Tax
- The Finance Bill which will be introduced in April 2021, will abolish the link between increases in the Consumer Price Index and the automatic increase of the yearly threshold under which capital gains are tax-exempt, Therefore, the threshold which will be deemed as exempt for individuals, administrators and trusts of disabled individuals will be kept at £12,300 until the tax year 2025-26, whereas the threshold for the majority of the other trusts will be kept at £6,150.
- The anti-tax avoidance law Taxation of Chargeable Gains Act (TCGA) 1992, s. 166, which prevents business assets gifted to non-UK residents from being tax-exempted, will be extended with the article s. 167 to all those business assets gifted to companies controlled by non-UK residents and directly connected with those companies transferring the business asset and vice versa.