FBD have a wealth of experience in advising businesses and individuals in the Scotland area on a range of key tax and financial planning issues. Here we consider strategies to help you to minimise your tax bill, maximise your profitability and boost your wealth.
The impact of the COVID-19 pandemic presented the UK with major challenges. The repercussions of such challenges continue to unfold as the economy begins to recover. Against this backdrop the government introduced a range of financial support measures to help businesses.
These measures, being ultimately temporary in nature, are not covered here. In this summary we focus on the other tax measures which may assist you, your family and your business when looking at longer term prudent financial planning.
Budget 2021 big freeze
Personal taxes, capital taxes, pensions. No dramatic announcements. But Chancellors can create considerable change through low-key tactics, and the Budget freeze for various rates and allowances until 5 April 2026 will impact many people.
The UK-wide personal allowance has been increased, and rose to £12,570 from 6 April 2021. The basic rate band also increased to £37,700. This means the higher rate threshold – the point at which you start paying higher, rather than basic rate tax in England, Wales and Northern Ireland – increased to £50,270 (if you have a full personal allowance).
But after this date, the personal allowance and higher rate threshold won’t change until 5 April 2026. As incomes rise, this brings more people within the tax net, and pushes some basic and higher rate taxpayers into the higher and additional rate bands. 1.3 million people, in fact, according to government figures, should come into income tax by 2025/26, and one million into higher rates of tax. From the 2026/27 tax year, starting 6 April 2026, the personal allowance and basic rate limit are indexed with the Consumer Price Index by default.
Scottish taxpayers: for Scottish taxpayers, income tax rates and bands for non-savings and non-dividend income are different from the rest of the UK: see Personal Tax Essentials later in this guide. The freeze to the personal allowance impacts Scotland, although the freeze to the UK higher rate threshold only affects those with savings and dividend income.
Big change postponed?
There’s been much discussion of a major tax overhaul, with inheritance tax (IHT), capital gains tax and pensions contenders for a makeover. It didn’t happen on Budget day, nor the UK’s first ‘Tax Day’, which was the publication day for a raft of tax consultations. What Tax Day did produce was a commitment to reduce red tape for IHT, so that from 1 January 2022, over 90% of non-taxpaying estates shouldn’t complete IHT forms for deaths when probate or confirmation is required.
But sooner or later, change is likely, as the government looks beyond the COVID-19 crisis. Perhaps it has been reined back until 2026, when the big freeze ends. We shall have to wait and see. In the meanwhile, please do not hesitate to contact us for advice in any of these areas.
Off-payroll working in the private sector
From 6 April 2021 new tax rules apply for individuals who provide their personal services via an ‘intermediary’ to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.
The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and national insurance contributions (NICs) and pay any employer NICs where the worker is deemed to be caught by the rules.
Plant and machinery - super-deduction
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.
Under this measure a company will be allowed to claim:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
This relief is not available for unincorporated businesses.
Your financial planning strategy
In the face of ongoing change, it is more important than ever to have a robust business and personal financial planning strategy in place, to help ensure that you and your family are financially secure and on course to achieve your long-term goals.
If you're in the Scotland area and would like advice on tax planning strategies, please contact FBD.