Finance bill 2021 incorporates Budget tax changes

The Finance Bill 2021 has been published to put into legislation the tax changes announced in the Budget on 3 March 2021.

It ensures a number of tax changes take effect from 6 April 2021, including:

• the extension of the stamp duty holiday
• extending the VAT cut for tourism and hospitality to September

The Bill also legislates to improve public finances through:

• Increasing the rate of Corporation Tax to 25% on profits over £250,000 from April 2023, Over 90 per cent of businesses will pay less than the 25%.
• Freezing Income Tax Personal Allowance and Higher Rate Threshold at 2021 levels.
• Freezing the Capital Gains Tax Annual Exempt Amount (AEA), the inheritance tax nil-rate band and the pensions Lifetime Allowance at their current levels

The Bill also legislates to:

• Implement a Plastic Packaging Tax which encourages the use of recycled plastic instead of new plastic within packaging. The rate of the tax is £200 per tonne of plastic packaging which contains less than 30% recycled plastic content.
• Reform the penalty regime for VAT and Income Tax Self-Assessment (ITSA). The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached.

The Bill helps drive an investment-led recovery through:

• the ‘super deduction’ - from 1 April 2021 until 31 March 2023. The independent OBR have forecast that, at its peak, the super-deduction will raise the level of business investment by 10%, or roughly £20bn a year.
• supporting the introduction of Freeports through allowing the government to designate ‘tax sites’ in Freeports in Great Britain, where businesses will be able to benefit from a number of tax reliefs.

The Bill requires Parliamentary approval.

Further information

The 2021 Finance Bill also legislates for other tax changes, the majority of which having been previously announced and consulted upon, that were then confirmed at the Budget.

Over half of the Bill was published in draft for consultation at ‘Legislation days’ in July 2020, November 2020, and in July 2018.

Further analysis of the Budget is available in our download

HMRC has also issued rates and thresholds for employers 2021/22.