Key tax changes from April 2021

We have set out some of the key tax developments for all organisations, including charities, which came into force in April 2021.

Employment taxes

Changes to off-payroll working

The reach of IR35 legislation has been extended. The aim of the IR35 rules is to ensure that individuals who work like employees, but through an intermediary (typically their own personal service company), pay similar Income Tax and National Insurance Contributions (“NIC”) to other employees.

From 6 April 2021, for medium and large-sized organisations in the private and third sectors (including charities), the responsibility for deciding whether the IR35 rules apply will become the responsibility of the organisation that is the end user of the worker’s service (the “end-client”).

An organisation is “medium or large-sized” if two or more of the following apply:

  • Annual turnover (excluding donations and grant income) is more than £10.2m
  • Balance sheet total is more than £5.1m
  • Average number of employees is more than 50

An unincorporated entity (such as a charitable trust) is medium or large if its annual turnover (excluding donations and grant income) exceeds £10.2 million.

For more details please see our blog on IR35 changes.

National Minimum Wage UK (NMW) / National Living Wage UK (NLW)

Increases to the NMW and NLW from 1 April 2021:

TypeAgeFrom 01.04.21Previous% increase
National Living Wage23+£8.91£8.722.2%
National Minimum Wage21-22£8.36£8.202.0%
National Minimum Wage18-20£6.56£6.451.7%
National Minimum Wage<18£4.62£4.551.5%
Apprentice Rate£4.30£4.153.6%

HMRC’s enforcement activity has increased significantly over the last few years. Non-compliant employers face repaying arrears to current and former employees. Businesses can also face 200% penalties (this could be up to £20,000 per employee) and the prospect of their reputation also being damaged from being named in the media.

2021 statutory payments

  • The Statutory maternity pay, paternity pay, shared parental pay and parental bereavement pay increases to £151.97 from £151.20 from 4 April 2021
  • Statutory sick pay increases to £96.35 from 6 April 2021
  • Statutory redundancy pay is calculated using the employee’s length of service, age and their weekly pay. However, there is a statutory cap on the value of a week’s pay. From 6 April 2021 this has increased to £544 per week.

VAT

Digital links requirement

The soft landing period for Making Tax Digital for VAT has now finished and digital links are now required from 1 April 2021, therefore the ‘cut and paste’ or ‘copy and paste’ is no longer allowed. However, HMRC accept the following as digital links:

  • Linked cells within a spreadsheet
  • Emailing a spreadsheet containing digital records to enable the information to be imported into another software product
  • Transferring a set of digital records onto a portable device (i.e. memory stick) and physically giving this to someone else who then imports that data into their software
  • XML, CSV import and export, and download and upload of files
  • Automated data transfer
  • API transfer although there are certain manual adjustments that are still permitted

Find out more about digital links.

Extension to temporary reduced VAT rate for tourism and hospitality

The temporary reduced VAT rate of 5% for goods and services supplied by the tourism and hospitality sector has been extended until 30 September 2021. After that the rate will increase to 12.5% for a further six months until 31 March 2022, before returning to 20%.

Business rates

Extension of business rates holidays

100% business rates relief will continue to be provided to eligible retail, hospitality and leisure properties in England from 1 April 2021 to 30 June 2021. Moreover, this will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

Contact us

If you would like more information on any of the above, then please contact:

Employment taxes: Clair Williams

VAT: Hydeam Sulton

Corporation tax: Louise Cottam