In this blog, we outline the key corporation tax and VAT changes that you need to know about for the tax year 2021/22. Look out for our other blogs detailing the changes to other types of tax this tax year.
Corporation Tax
The Corporation Tax Rate remains unchanged at 19% for the financial years 2021 and 2022. From April 2023 however, companies with taxable profits of more than £250,000 will pay corporation tax at a main rate of 25%. A small profits rate of 19% will apply to companies with profits of £50,000 or less.
Companies with profits of between £50,000 and £250,000 will pay corporation tax at the main rate of 25%, but will receive marginal relief. The application of marginal relief will provide for a gradual increase in the effective rate of corporation tax. Details of how the marginal relief will work have yet to be announced.
The limits are reduced to take account of any associated companies, and also for short accounting periods of less than 12 months.
VAT
The VAT Registration Threshold has been frozen at £85,000 for two years.
The VAT De-Registration Threshold remains at £83,000.
The Temporary 5% rate of VAT for hospitality, holiday accommodation and leisure attractions will remain in place until 30 September 2021. From 1 October 2021 until 31 March 2022 a new Reduced Rate of 12.5% will apply, before reverting to the Standard Rate of 20% from 1 October 2022.
The main impact of the above changes is that companies with taxable profits of more than £250,000 will suffer a 6% hike in tax from 1 April 2023. A company with a 31 March year end and taxable profits of £300,000, will pay £18,000 more in corporation tax for the year to 31 March 2024 than for the year to 31 March 2023.
