Understanding the Most Significant Changes in UK’s Business Financial Year for 2021
As the UK’s financial year has just begun, it is important for businesses to be aware of the changes that have been implemented and how they might impact their operations. In this article, we will discuss the most significant changes that have been made for the 2021 financial year and how businesses can adapt to them.
Changes to VAT Rules
One of the most significant changes this year is the revised VAT rules for goods imported into the UK. Previously, companies were able to import goods into the UK and delay the payment of any VAT until the goods were sold to the end customer. However, this rule has now been abolished, and businesses must now pay VAT upfront when importing goods into the UK. This change is expected to generate additional revenue for the government, but it may lead to cash flow issues for businesses that rely heavily on imported goods.
Changes to National Insurance Contributions
Another important change this year is the increase in the National Insurance contribution rates. This increase affects both employers and employees, and it is expected to raise an estimated £12 billion per year. For employees, the rate has increased from 12% to 13.8%. Employers will also see their contributions increase to 15.05% from 13.8%. This is expected to affect businesses that have high numbers of employees, particularly those in the retail and hospitality sectors.
Changes to the Furlough Scheme
The furlough scheme has been extended until September 2021. However, there are changes to how the government will contribute to employee wages, and employers will have to contribute additional funds to keep their staff on furlough. Between July and September, employers will be required to contribute 10% of an employee’s wages, with the government contributing 70%. This will gradually shift, with employers being required to contribute 20% in September, and the government contributing 60%.
Changes to Income Tax and Corporation Tax
For the 2021 financial year, there have been no changes to the income tax rates. However, there will be changes to the corporation tax rates from April 2023. The rate will increase from 19% to 25%, affecting all businesses with profits over £250,000. Smaller businesses will not be affected, as they will remain on the 19% rate.
Conclusion
The changes to the UK’s financial year can have a significant impact on businesses, and it is important to be aware of them to avoid unexpected costs or cash flow issues. As the UK government continues to respond to the COVID-19 pandemic, businesses should stay informed of any further changes that may be implemented. By understanding the changes and adapting to them, businesses can mitigate any risks and continue to operate successfully in the current financial climate.
