Budget 2021: Million more set to pay income tax by 2026
Autumn Budget 2021
Chancellor Rishi Sunak said that the threshold at which the tax starts being paid will be frozen until 2026 after a rise this April. It means getting a pay rise could pull people into a higher rate of tax. Commentators have called it an increase in an individual's tax burden "by stealth". The chancellor said that he wanted to be honest with the British public about the way in which money would be raised to pay for support schemes during the coronavirus pandemic. At present, people start paying 20% income tax when they earn £12,500 a year, known as the personal allowance.
How to build your personal credit
The first £12,500 they earn is tax-free with the 20% rate only being charged on everything they earn above that amount, up to the higher rate tax threshold. The starting point for paying the higher 40% rate is £50,001. These thresholds will go up to £12,570 and £50,270 in April, but will then be frozen until April 2026.
The Office for Budget Responsibility, the government's official but independent forecaster, said this policy would bring 1.3 million more people into paying income tax and one million more into paying at the higher rate.
This is known as fiscal drag. While the Scottish government has the ability to vary tax rates and bands under its devolved powers, the tax free personal allowance threshold is set by the chancellor and applies to the whole of the UK.
For a small business to be successful, you need to get on top of running your business, you need access to the right tools and advice – particularly on the accountancy front. Doing the accounts can feel like a full-time job and with Brexit, COVID, and ‘Making Tax Digital’ (MTD) for VAT in full swing, as well as MTD for income tax self-assessment (ITSA) coming up, things are only going to get more complicated. At the same time, advances in cloud technology are changing the way small businesses work. New types of accounting software packages are a big part of this, designed to speed-up and streamline time-consuming and onerous tasks. A big part of this being new types of accounting software packages. What they can’t replicate, however, is the human touch of a professional accountant. 90% of small businesses that use an accountant see them as an important part of their operations. Background: Digital accounting solutions can empower small businesses, helping them manage their finances more effectively. Having access to expert advice means small businesses can focus on what really matters — their customers. It’s a fact that advice and support — even just having a knowledgeable person to talk things through with — is an essential part of running any small business. And now, with MTD for VAT well under way and MTD for Income Tax Self-Assessment looming, there’s an entirely new process to get to grips with. By going digital, the government hopes to simplify the tax process, helping small businesses get things right the first time round. Unincorporated businesses and landlords with a total income of over £10,000 will no longer be filing their taxes manually, but instead updating a digital tax account regularly throughout the year. While the goal is to reduce mistakes and speed the tax process up, there’s going to be a pretty steep learning curve for small businesses just starting out. That is why professional accountancy support is so important. The HMRC’s own guidelines say businesses should get the help of an accountant if they’re worried about MTD compliance. Digital systems can help ease the workload, and they’re a handy place to lay out data for closer inspection. Building your business: For a small business to operate, it needs to nail the fundamentals and get its taxes right – two areas in which an accountant can really help. With apps and automated systems sorting out the basics, small businesses are free to explore the deeper business advice services that accountants can offer. Importantly, an accountant’s advice can also consider the business’ values and vision, helping them weather most storms. A survey found that small businesses understand the importance of accountants to business development. When considering how best to grow, 44% of small businesses said they would consult with an accountant. That was more than those who would first seek an investor , secure a government grant, speak with a management consultant, or secure a bank loan. Despite this, the consultancy services offered by accountants are sometimes overlooked, with small businesses missing out on advice when making the big business decisions — assistance that could help them make the right choices and give them a competitive edge. Steps to success: Get ahead by getting in touch with Kernow Accountancy and speak to other business owners. Automate data entry – digital accountancy software is key to easing the admin burden. Stop hoarding paper receipts – snap them with your phone, share them on your accounting software and store them digitally. Kernow Accountancy will make tax relevant for your business –and advise on the right structure (sole trader, partnership, or limited liability company). You don’t have to do it all, and it doesn’t have to cost the earth. Call Kernow Accountancy to book an appointment so we can advise and start to build a solid relationship. We can smooth the path to you achieving your goals and dreams.
Tel: 01326 377104
Kernow House, 17 Green Lane,
Penryn, TR10 8QQ
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For a small business to be successful, you need to get on top of running your business, you need access to the right tools and advice – particularly on the accountancy front. Doing the accounts can feel like a full-time job and with Brexit, COVID, and ‘Making Tax Digital’ (MTD) for VAT in full swing, as well as MTD for income tax self-assessment (ITSA) coming up, things are only going to get more complicated. At the same time, advances in cloud technology are changing the way small businesses work. New types of accounting software packages are a big part of this, designed to speed-up and streamline time-consuming and onerous tasks. A big part of this being new types of accounting software packages. What they can’t replicate, however, is the human touch of a professional accountant. 90% of small businesses that use an accountant see them as an important part of their operations. Background: Digital accounting solutions can empower small businesses, helping them manage their finances more effectively. Having access to expert advice means small businesses can focus on what really matters — their customers. It’s a fact that advice and support — even just having a knowledgeable person to talk things through with — is an essential part of running any small business. And now, with MTD for VAT well under way and MTD for Income Tax Self-Assessment looming, there’s an entirely new process to get to grips with. By going digital, the government hopes to simplify the tax process, helping small businesses get things right the first time round. Unincorporated businesses and landlords with a total income of over £10,000 will no longer be filing their taxes manually, but instead updating a digital tax account regularly throughout the year. While the goal is to reduce mistakes and speed the tax process up, there’s going to be a pretty steep learning curve for small businesses just starting out. That is why professional accountancy support is so important. The HMRC’s own guidelines say businesses should get the help of an accountant if they’re worried about MTD compliance. Digital systems can help ease the workload, and they’re a handy place to lay out data for closer inspection. Building your business: For a small business to operate, it needs to nail the fundamentals and get its taxes right – two areas in which an accountant can really help. With apps and automated systems sorting out the basics, small businesses are free to explore the deeper business advice services that accountants can offer. Importantly, an accountant’s advice can also consider the business’ values and vision, helping them weather most storms. A survey found that small businesses understand the importance of accountants to business development. When considering how best to grow, 44% of small businesses said they would consult with an accountant. That was more than those who would first seek an investor , secure a government grant, speak with a management consultant, or secure a bank loan. Despite this, the consultancy services offered by accountants are sometimes overlooked, with small businesses missing out on advice when making the big business decisions — assistance that could help them make the right choices and give them a competitive edge. Steps to success: Get ahead by getting in touch with Kernow Accountancy and speak to other business owners. Automate data entry – digital accountancy software is key to easing the admin burden. Stop hoarding paper receipts – snap them with your phone, share them on your accounting software and store them digitally. Kernow Accountancy will make tax relevant for your business –and advise on the right structure (sole trader, partnership, or limited liability company). You don’t have to do it all, and it doesn’t have to cost the earth. Call Kernow Accountancy to book an appointment so we can advise and start to build a solid relationship. We can smooth the path to you achieving your goals and dreams.