Higher residential SDLT threshold extended

Stamp duty land tax (SDLT) is payable when you buy a property in England or Northern Ireland. Last year, the SDLT residential threshold was temporarily increased to £500,000 with effect from 8 July 2020. The threshold was due to revert to its normal level of £125,000 from 1 April 2021, but this has now been delayed.

The residential threshold applying in Scotland for Land and Buildings Transaction Tax (LBTT) was also increased for a temporary period, but reverted to its normal level of £145,000 from 1 April 2021. In Wales, the residential Land Transaction Tax (LTT) threshold was increased to £250,000 from 27 July 2020. It will remain at this level until 30 June 2021, reverting to its usual level of £180,000 from 1 July 2021.

SDLT residential threshold – 8 July 2020 to 30 June 2021

The SDLT residential threshold will remain at £500,000 until 30 June 2021. The rates applying until that date are set out below.

Property value	Main home	Additional properties
Up to £500,000	Zero	3%
Next £425,000 (£500,001 to £925,000)	5%	8%
Next £575,000 (£925,001 to £1.5 million)	10%	13%
The remaining amount (over £1.5 million)	12%	15%

SDLT residential threshold – 1 July 2020 to 30 September 2021

From 1 July 2021 until 30 September 2021, a lower temporary residential SDLT threshold of £250,000 will apply. The first-time buyer threshold (which applies where the consideration does not exceed £500,000) reverts to £300,000 from 1 July 2021.

The SDLT rates applying for this period are set out below.

Property value	Main home	Additional properties
Up to £250,000	Zero	3%
Next £675,000 (£250,001 to £925,000)	5%	8%
Next £575,000 (£925,001 to £1.5 million)	10%	13%
The remaining amount (over £1.5 million)	12%	15%

SDLT residential threshold from 1 October 2021

The SDLT residential threshold returns to £125,000 from 1 October 2021. The residential rates applying from that date are set out below.

Property value	Main home	Additional properties
Up to £125,000	Zero	3%
The next £125,000 (£125,001 to £250,000)	2%	5%
Next £675,000 (£500,001 to £925,000)	5%	8%
Next £575,000 (£925,001 to £1.5 million)	10%	13%
The remaining amount (over £1.5 million)	12%	15%

Contact us

If you are looking to buy a property this year, speak to us to find out what you can save by completing the sale by 30 June 2021 or, if this is not possible, by 30 September 2021. Remember, if you are looking to buy an investment property, you will also benefit from the higher thresholds as the 3% supplement is added to the residential rates, as reduced.

Taxation of company cars in 2021/22

If you are an employee with a company car, you will be taxed on the benefit derived from the car being available for your private use. If you are an employer who makes company cars available to your employees, they will be taxed on the associated benefit. The amount that is charged to tax depends predominantly on the list price of the car and its appropriate percentage. There are some changes to the appropriate percentages for 2021/22.

You can find details of the appropriate percentages applying for 2021/22 here.

Electric company cars

For 2020/21, it was possible to enjoy the benefit of an electric company car tax-free as the appropriate percentage for zero-emissions cars was set at 0%. The appropriate percentage for zero-emission cars is increased to 1% for 2021/22. Although a tax-free company car is no longer an option for 2021/22, an electric company car remains a very attractive benefit. The cash equivalent value (the amount on which tax is charged) for an electric car with a list price of £30,000 is only £300 for 2021/22, costing a higher rate taxpayer £120 in tax and a basic rate taxpayer £60 in tax. If you are an employer, your Class 1A National Insurance hit will be £41.40.

Cars first registered on or after 6 April 2020

The way in which CO2 emissions are measured changed for cars first registered on or after 6 April 2020. From that date, the car’s CO2 emissions are determined using the Worldwide harmonised Light Vehicle Test Procedure (WLTP). For cars first registered prior to that date, the car’s CO2 emissions were determined in accordance with the New European Driving Cycle (NEDC).

For 2020/21, the appropriate percentage for cars first registered on or after 6 April 2020 (and whose CO2 emissions are determined using the WLTP), was two percentage points lower than that for cars first registered prior to 6 April 2020 (and whose CO2 emissions were determined using the NEDC).

The differential is reduced by one percentage point for 2021/22. This means that, subject to the maximum charge of 37%, the appropriate percentage for cars first registered on or after 6 April 2020 is one percentage point higher than its 2020/21 level. Thus, where the appropriate percentage was, say, 15% for 2020/21, it is 16% for 2021/22. The increase will mean that if you have a company car which was first registered on or after 6 April 2020, you will pay slightly more tax in 2021/22 than in 2020/21.

The diesel supplement remains at 4% for diesel cars not meeting the RDE2 emissions standard (subject to the maximum charge of 37%).

Cars first registered before 6 April 2020

There is no change to the appropriate percentages for cars first registered prior to 6 April 2020. This means that if you have a company car that was registered before this date, your tax bill for 2021/22 will be the same as for 2020/21.

Talk to us

If you are thinking of changing your company car or making changes to your company car fleet, we can help you understand the associated tax costs.

Recovery loan scheme

If you need to access finance to help your business recover from the effects of the COVID-19 pandemic, the Recovery Loan Scheme may be for you.

Nature of the scheme

The Recovery Loan Scheme is designed to provide access to finance in order to support businesses as they recover from the disruption caused by the COVID-19 pandemic. Although, as the borrower, you will remain liable for 100% of the debt, to encourage lenders to participate in the scheme, the Government provides a guarantee to the lender for 80% of the finance.

Eligibility

You may be eligible for a Recovery Loan if your business is trading in the UK. To qualify, you must be able to demonstrate that your business would be viable were it not for the pandemic and that your business has been adversely affected by the pandemic. Furthermore, you must not be in collective insolvency proceedings.

You can still apply for a Recovery Loan if you have already taken out a Bounce Back Loan or a Coronavirus Business Interruption loan.

Available finance

Finance is available under the Recovery Loan Scheme for:

• term loans and overdrafts of between £25,001 and £10 million per business; or
• invoice or asset finance of between £1,000 and £10 million per business.

You will not need to provide a personal guarantee on facilities of up to £250,000, and where a personal guarantee is required, your main residence will not be taken as security.

The loan period depends on the type of finance provided. The maximum period is set at three years for overdrafts and invoice finance facilities and at six years for loans and asset finance facilities.

How to apply

Applications are made direct to the lender. You can find an accredited lender offering Recovery Loans on the Business Bank website.

We can help

Contact us to find out how we can help you address your financing needs.

Family companies and the optimal salary for 2021/22

If you run your business as a personal or family company, you will need to decide how best to extract profits for your personal use. A typical tax-efficient strategy is to pay yourself a small salary and then extract any further profits as dividends. Where this approach is adopted, you will need to determine your optimal salary level of 2021/22.

Benefits of paying a salary

Unless you already have the 35 qualifying years needed for the full single-tier state pension when you reach state pension age, paying yourself a salary that is at least equal to the lower earnings limit for Class 1 National Insurance purposes (set at £6,240 for 2021/22) will ensure that the year is a qualifying year for state pension and contributory benefit purposes. A further benefit of this approach is that employee contributions between the lower earnings limit and the primary threshold (set at £9,568 for 2021/22) are payable at a zero rate (although employer contributions are payable on earnings in excess of the secondary threshold (set at £8,840 for 2021/22)).

Determining the optimal salary level

The optimal salary level (from a tax and National Insurance perspective) for 2021/22 will depend on whether your personal allowance remains available, and also on whether your company is able to claim the National Insurance Employment Allowance. The Employment Allowance is set against your employer’s Class 1 National Insurance liability.

The Employment Allowance is not available to companies where the sole employee is also a director. This means that if you operate as a personal company where you are the only employee and director, you will be unable to claim the allowance. However, if you operate as a family company and have more than one employee (or the only employee is not also a director), you should be able to claim the allowance. The allowance is set at £4,000 for 2021/22. It is not available where the Class 1 National Insurance bill for 2020/21 was £100,000 or more.

Optimal salary where the Employment Allowance is unavailable

If you are operating a personal company or if the Employment Allowance is otherwise unavailable, assuming that you have not used your personal allowance elsewhere, your optimal salary for 2021/22 is one equal to the primary threshold of £9,568. Remember, that as a director, you have an annual earnings period for National Insurance purposes. However, if you opt to pay yourself a monthly salary, the equivalent is £797 per month.

As the secondary threshold for 2021/22 is lower than the primary threshold, employer’s National Insurance contributions will be payable to the extent that your salary exceeds £8,840. If you pay yourself a salary of £9,568 for 2021/22, your company will need to pay employer’s National Insurance contributions on that salary of £100.46 (13.8% (£9,568 – £8,840)).

Although it is possible to pay a salary equal to the secondary threshold of £8,840 free of tax and National Insurance, it is worthwhile paying a higher salary of £9,568. The salary and the associated employer’s National Insurance contributions are deductible in calculating your company’s taxable profits for corporation tax purposes. As the rate of corporation tax at 19% is higher than the rate of employer’s National Insurance at 13.8%, the corporation tax relief obtained on the higher salary outweighs the cost of the employer’s National Insurance. However, once your salary exceeds the primary threshold of £9,568, you will need to pay primary contributions on the excess at the rate of 12%. As the combined National Insurance hit at 25.8% outweighs the rate of corporation tax relief (at 19%), this is not worthwhile.

Optimal salary where the Employment Allowance is available

The Employment Allowance reduces your employer’s Class 1 National Insurance bill by up to £4,000. Where this is available, your optimal salary for 2021/22 is one equal to your personal allowance. This will normally be £12,570.

As the Employment Allowance will offset any employer’s Class 1 National Insurance contributions that would otherwise be payable to the extent that your salary exceeds £8,840, you will not need to pay any tax or National Insurance until your salary level reaches the primary threshold of £9,568. Once this level is reached, it is worth paying additional salary of £3,002 for the year to take your salary up to the level of the personal allowance of £12,570. Although you will pay employee’s National Insurance contributions of £360.24 (£3,002 @ 12%) on the additional salary, as the salary is deductible for corporation tax purposes, you will reduce the corporation tax payable by your company by £570.38 (£3,002 @ 19%), delivering a net saving of £210.14.

However, once your salary exceeds the personal allowance of £12,570, tax will also be payable at the basic rate of 20%, meaning the pendulum swings the other way and the combined tax and employee’s National Insurance payable on any further salary will outweigh the associated corporation tax deduction.

Get in touch

Your optimal salary will depend on your individual circumstances. We can help you decide on your 2021/22 salary level.

Extended carry-back for losses

To help businesses which have suffered losses as a result of the COVID-19 pandemic, the period for which certain trading losses can be carried back is extended from one year to three years. The extended carry-back period applies for both income tax and corporation tax purposes. If you have made losses as a result of the impact of the pandemic, you may be able to take advantage of the extended carry-back period to generate a welcome tax repayment. Guidance on the rules can be found on the Gov.uk website.

Income tax

Where a trading loss is made by an unincorporated business, there are a number of options available to relieve that loss. The options open to a particular business depend on when in the business lifecycle the loss is incurred, and also whether the business prepares its accounts using the cash basis or the accrual basis. The loss can be set against general income of the current and/or previous year, and also against future trading profits of the same trade, with special rules applying to relieve losses incurred in the early years of the trade, and in the final year.

One option for obtaining relief for a trading loss is to set the loss against general income of the year of the loss and/or the previous year. However, where accounts are prepared using the cash basis, sideways loss relief against other income or relief against capital gains is not permitted – the loss can only be set against trading profits of the same trade.

The temporary extension to the carry-back rules extends the period for which the loss can be carried back from one year to three years. Where a claim is made under the new rules, losses are set against the trading profits of a later year before those of an early year. Any loss carried back under the temporary carry-back rules can only be set against previous trading profits of the same trade – there is no extension to other income.

Relief for a 2020/21 loss

Unless the business is a new business to which the opening year basis period rules apply, a loss for the 2020/21 tax year will be a loss for an accounting period ending in that year, i.e., between 6 April 2020 and 5 April 2021.

The extended carry back is available where a claim is made to relieve the loss against general income of 2020/21 and/or 2019/20 and income in these years is insufficient to utilise the full loss. The unrelieved loss can be carried back and set against trading profits of 2018/19 and, to the extent that any of the loss remains unrelieved, against trading profits of 2017/18. It is not possible to tailor the loss to preserve personal allowances — it must be set in full against the available trading profits.

To the extent that the loss remains unrelieved after making a claim under the extended carry-back rules, it can be carried forward for relief against future profits of the same trade.

Relief for a 2021/22 loss

The extended carry-back period is also available for a 2021/22 loss. For an established business, this will be a loss for an accounting period which ends between 6 April 2021 and 5 April 2022.

As with a loss for 2020/21, the temporary rules allow a loss for 2021/22 which cannot be fully relieved against income of 2021/22 and 2020/21 to be carried back. The unrelieved loss can be set first against trading profits of the same trade for 2019/20 and, to the extent that any of the loss remains unrelieved, against trading profits of 2018/19.

If a claim has been made to relieve a 2020/21 loss against general income of 2019/20, this takes precedence over a claim to carry back a 2021/22 loss against trading profits of 2019/20 under the new rules.

Cap on loss relief

The normal cap on loss relief of £50,000 or, where higher, 25% of adjusted net income, does not apply to losses relieved under the extended carry-back rules. Instead, the loss that can be carried back for each year is capped at £2 million.

Corporation tax

For corporation tax purposes, a loss can be carried back and set against profits from the same trade for the previous accounting period or carried forward and set against future profits of the same trade. The period for which losses can be carried back is extended from one year to three years for a limited period.

The extended carry-back period applies to losses for accounting periods ending between 1 April 2020 and 31 March 2022. For each accounting period, the loss that can be carried back under the new rules is capped at £2 million. Where a company is part of a group, the cap applies to the group as a whole. Losses carried back must be set against the profits of a later period before those of an earlier period.

Benefits of carrying a loss back

The ability to carry a loss back can be beneficial where this generates a repayment of tax already paid for a previous year. This will be particularly true for companies within the charge for corporation tax.

For unincorporated businesses the position is more complex where carrying back a loss results in personal allowances being wasted. Where this is the case, and the trader expects to return to profit, it may be preferable to carry the loss forward for use against future trading profits of the same trade. The best result will depend on individual circumstances and priorities, and there is no substitute for doing the sums.

Speak to us

If you have realised a loss, or expect to, as a result of the impact of the COVID-19 pandemic, speak to us to find out how best to obtain relief for that loss.