What are the 2021 tax changes for the UK?

Led by its ambition to be an advanced country in tax authority, the government imposes increases and spending plans as new tax changes are set in the UK for the remainder of 2021.


Impact of Brexit on taxes

The business benefits that the UK used to enjoy when they were part of the single market are no longer available. Now that the exit from the EU is finalized, several fiscal changes are brought to the table, with an expected resonance through the UK’s economic walls.

Under the circumstances, how are you doing post-Brexit tax ramifications?

TCA and taxes

Before the divorce was completed, a Trade and Cooperation Agreement (ATT) was drawn up to outline trade provisions, mutual assistance, and tax matters. However, he didn’t go into much detail when it comes to the latter (except for the new rules of origin).

The significant tax impact of TCA is the requirement of rules of origin. It was modified in the agreement that goods originating in the EU or the UK are insured without tariffs.

Apart from Brexit, the pandemic also contributed to the changes in 2021. There have been deferrals in VAT payments and reductions in VAT rates for the hospitality and leisure industry.

But this is only the tip of the iceberg. Take a look at the new tax points that apply to your business in the future.

Tax updates for 2021

  1. An increase in the corporate tax rate is taking place in the UK. The corporate tax threshold remains at 19% until March 31, 2023. After that period, it will increase to 25% as of April 1, 2023.

    It will also come with a small profit rate of 19% for companies whose profits do not exceed £ 50,000.

  2. Hospitality, holiday accommodation and attractions have a reduced VAT rate of 5% until September 30, 2021. A reduced rate of 12.5% ​​will follow immediately until March 31, 2022.
  3. UK companies using more than 10 tonnes of plastic packaging are subject to the new plastic packaging tax of £ 200 per tonne from April 2022.
  4. The landfill tax raised the standard and lowered rates from April 2021 with a standard rate of £ 96.70 per tonne and a lower rate of £ 3.10 per tonne.
  5. Special Vehicle Tax (VED) rates for cars, trucks, motorcycles and commercial motorcycle licenses will increase as of April 1, 2021.
    1. In the case of heavy vehicles and goods (HGV), the special tax is suspended due to the contraction of transport in the sector.
  6. There are new distance selling guidelines in the UK:
    1. Elimination of low import VAT rebate
    2. For sales less than £ 135, import VAT is not due. However, the seller must declare the supply VAT.
    3. For sales over £ 135, sellers outside the UK may apply a zero rate to the export sale. But the consumer pays the import VAT and customs duties.

      For a more detailed overview of updated hikes and assignments, you can visit the HMRC Page.

What do these mean to you?

The UK’s separation from the bloc came down to restricting British goods and services from moving freely in the single market, leading to tax increases and exchange rates. Administrative actions imposed after Brexit led to an increase in port declarations, paperwork, permits, you name it. It takes a certain degree of knowledge and technicality to coordinate with today’s tax authority systems and without them, mistakes can cost you delays.

Tariffs are also present in the commercial conditions. Depending on the point of origin, goods with components imported from elsewhere are still subject to tax, regardless of whether you are moving products to and from the UK and the EU.

Just saying compliance got stricter for traders, especially those from the UK and its constituent countries.

How do you keep up?

Heading into the post-Brexit and pandemic era, several UK tax changes are set for the remainder of 2021 and beyond, and keep in mind that these wide-ranging reforms are still in their infancy. Developments can still happen down the road, so it’s imperative that your organization is ready for whatever changes come your way.

However, if you find it difficult to meet these government mandates, outsourcing your back-office finance and accounting to a trusted partner is a solution you may consider trying.

D&V Philippines has more than 500 M&A professionals with up-to-date knowledge of the latest regulations and compliance in different countries. Get your copy of our latest technical report D&V Philippines Solutions for Modern Accounting Firms to find out how our accountants can run your accounting back-office efficiently, or Get in touch contact us for a free consultation.

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