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Pre Year End Tax Planning

Posted 12/03/2021

NMW & Employment Allowance

  • National minimum wage rates from 1st April 2021
Age of WorkerRate per Hour
Age 23+£8.91
21 and 22£8.36
Under 18£4.62
  • Beware of traps for employees getting older, they need to be moved up the scale
  • Don’t forget the employment allowance up to £4,000 which is deducted from employer NIC
    • Doesn’t apply for sole director payrolls
    • Only for small companies where employer NIC liability is less than £100,000
    • Only 1 amount for connected companies or companies under common control         

Personal Tax 2021/22


£12,570 Personal allowance

  • £37,700 Basic rate band
  • £50,270 Total income before higher rate tax

Marriage allowance

  • Marriage allowance transfer lets you transfer £1,250 of personal allowance to spouse/civil partner. Only where transferor has income below £12,500. Transferee must be a basic rate tax payer
  • Can claim for 2 years after the end of the tax year. 2018/19 (be quick) and 2019/20 still open


  • No changes in the Budget to the dividend tax rates, maybe in the Autumn
 Dividend Tax Rate
Dividend allowance £2,0000%
Basic rate band7.5%
High rate32.5%
Additional rate38.1%
  • Still vote the dividends and credit to Directors Loan Account, even if the cash flow is not available, must have the reserves to vote the dividends though

Director’s Remuneration

  • Still more tax efficient to operate a ‘small’ salary and dividends
  • Some Directors are not entitled to claim furlough which has resulted in overdrawn loan accounts

Overdrawn loans

  • Clear with dividends, but must have reserves
  • Pay s455 tax? 32.5% on balance not cleared within 9 months of end of accounting period
  • No profits – declare a bonus – within 9 months for Corporation tax relief

Benefit in kind loans

  • No benefit in kind where loan does not exceed £10,000
  • Where loan exceeds £10,000, HMRC official rate of interest is applied – 2.25%

Use Your Tax-Free Pension Allowance

  • The standard annual pension allowance is 100% of earned income or £40,000, whichever is higher
  • This is restricted if your income exceeds £150,000
  • If you are a higher-rate or additional rate taxpayer you can claim extra tax relief
  • You can also carry forward any unused annual allowance from the three previous tax years
  • The 2020/21 lifetime allowance is £1,073,100

Trivial Benefits in Kind

  • Tax free trivial benefits in kind can be provided to an employee
  • Cannot be cash or a cash voucher
  • Must be less than £50
  • Not contractual or salary sacrifice
  • Must not be for the recognition of past or future service
  • Annual limit £300

Tax free Benefits in Kind

  • Working from home exemption increased from £4 per week to £6 per week from 6th April 2021
  • For 2020/21 only, this can be claimed online providing you don’t complete a tax return
Tax free benefitsTax free benefits
Mobile phone provided (contract in company name)Christmas or annual party (up to £150)
Workplace parkingHealth screening assessment
Childcare vouchersPensions advice up to £500 pa
Interest free loans up to £10,000Long service awards
Staff trainingMeals in staff canteen
Relocation costs up to £8,000Counselling
Mileage claims at HMRC’s approved rates (45p first 10,000 miles, 25p thereafter)Job related training  

Company Car Tax

Cars registered before 6 April 2020

CO2 g/km0% range (miles)% of list price
1-50g>130 miles2%
 70-129 miles5%
 40-69 miles8%
 30-39 miles12%
 <30 miles14%
Then each 5g +1%
Maximum at 160g+ 37%

Cars registered on/after 6 April 2020

CO2 g/km0% range (miles)% of list price
1-50g>130 miles1%
 70-129 miles4%
 40-69 miles7%
 30-39 miles11%
 <30 miles13%
Then each 5g +1%
Maximum at 165g+ 37%

Worldwide Harmonised Light Vehicle Test Procedure to be used as a measure of emissions for cars registered on or after 6 April 2020


  • 2021/22 van benefit in kind rate £3,500 unless there is insignificant private use                                                  (HMRC’s example is taking a mattress to the tip)
  • Nil benefit in kind for zero emission vans

Private fuel

  • Van fuel benefit in kind £696
  • Car fuel benefit in kind is £24,600 x % based on C02 emissions


  • Very low rates of BIK for electric & hybrid cars

Capital Allowances – Cars

100% First Year Allowances for Cars

  • 100% FYA for cars was due to expire in April 2021 but extended to 2025 but only for 0g/km emission cars
  • Cars emitting no more than 50g/km will go into the main capital allowances pool and receive writing down allowances at 18% per annum
  • Cars emitting more than 51g/km
  • Car leases – 15% added back for corporation tax where C02 emissions are more than 50g/km

Capital Allowances – Plant & Machinery

Annual Investment Allowance

  • Remains at £1million on qualifying plant & machinery expenditure to 31 December 2021 then back down to £200,000
  • Timing of expenditure – make sure incurred before the end of your financial year rather than start of the new financial year
  • Writing down allowances – 18% and 6%

Super Deduction

  • 130% deduction for plant & machinery expenditure incurred for 2 years between 1 April 2021 and    31 March 2023
  • Special Rate Pool Assets have 50% FYA, then normal 6% writing down allowances
  • Excludes cars

Seems to be for companies only

Corporation Tax

  • Budget announcement of a 6% increase in corporation tax rates from 19% to 25% from 1 April 2023
    • Only for companies with profits exceeding £250,000
  • Remains at 19% for small companies with profits below £50,000
  • Hybrid rate of 26.5% for profits between £50,000 and £250,000
  • 19% doesn’t apply to close investment holding companies
  • Thresholds must be dividends by the number of companies under common control

Trading Loss Carry Back

  • Temporary extension to the trading loss carry back rules
    • Currently only 1 year carry back
    • Extended to 3 years
  • Applies for companies for accounting periods between 1 April 2021 and 31 March 2022
  • Applies for unincorporated entities for 2020/21 and 2021/22 tax years

Capital Gains Tax

  • Annual Exemption remains at £12,300
  • No changes to Business Asset Disposal Relief (previously Entrepreneur’s Relief)
    • Remains at 10% for £1 million qualifying gains meeting the qualifying conditions
    • 30 day CGT reporting & payment for residential property disposals. Hammond McNulty can help you with this. Notify us when an offer is accepted

CGT rates

 Basic rateHigher rate
Non residential10%20%


  • Reforms apply from 6 April 2021 to medium & large sized companies within private sector
  • Assessment responsibility moves from contractor/PSC to end-user (fee payer)
  • If IR35 applies, end-user must operate PAYE/NIC
  • Current rules for small private sector end-users whereby the contractor/PSC will remain responsible for determining whether IR35 applies and end user still pays the PSC gross


  • SME tax credit 230% relief
  • Where this creates a loss, 14.5% refund can be obtained as a tax credit
  • Budget proposal was to limit the refund for year to a maximum of £20,000 plus 3 times PAYE/NIC liability. Restriction starts on 1 April 2021


  • VAT registration threshold remained at £85,000
  • Making Tax Digital applies to all businesses from 1 April 2022
  • VAT reduced rate of 5% for hospitality, holiday accommodation & attractions until 30 September 2021
  • New rate of 12.5% from 1 October 2021 to 31 March 2022
  • 20% from 1 April 2022

VAT deferral

  • VAT originally deferred for 20 March – 30 June 2020 deferred to 31 March 2021 can be paid over 11 monthly instalments, interest free
  • New online opt in process opened


  • The Nil rate band will continue to be £500,000 for the period to 30 June 2021
  • From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000
  • 1 October 2021 sees the return of the standard nil rate band of £125,000

Other Budget Announcements

  • New recovery loans for £25k – £10m – 80% guaranteed by the Government
  • Restart grants of between £6,000 and £18,000 for those with premises (remember the grants are taxable).

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