Finance Act 2021
| Year | 2021 |
Finance Act 2021
2021 Chapter 26
An Act to grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance.
[10 June 2021]
Most Gracious Sovereign
WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
PART 1
Income tax, corporation tax and capital gains tax
Income tax charge, rates etc
1 Income tax charge for tax year 2021-22
Income tax is charged for the tax year 2021-22.
2 Main rates of income tax for tax year 2021-22
For the tax year 2021-22 the main rates of income tax are as follows—
(a) the basic rate is 20%,
(b) the higher rate is 40%, and
(c) the additional rate is 45%.
3 Default and savings rates of income tax for tax year 2021-22
(1) For the tax year 2021-22 the default rates of income tax are as follows—
(a)
(a) the default basic rate is 20%,
(b)
(b) the default higher rate is 40%, and
(c)
(c) the default additional rate is 45%.
(2) For the tax year 2021-22 the savings rates of income tax are as follows—
(a)
(a) the savings basic rate is 20%,
(b)
(b) the savings higher rate is 40%, and
(c)
(c) the savings additional rate is 45%.
4 Starting rate limit for savings for tax year 2021-22
(1) For the tax year 2021-22, the amount specified in section 12(3) of ITA 2007 (the starting rate limit for savings) is “£5,000”.
(2) Accordingly, section 21 of that Act (indexation) does not apply in relation to the starting rate limit for savings for that tax year.
5 Basic rate limit and personal allowance for future tax years
(1) For the tax years 2022-23, 2023-24, 2024-25 and 2025-26, the amount specified in section 10(5) of ITA 2007 (basic rate limit) is “£37,700”.
(2) For the tax years 2022-23, 2023-24, 2024-25 and 2025-26, the amount specified in section 35(1) of ITA 2007 (personal allowance) is “£12,570”.
(3) Accordingly—
(a)
(a) section 21 of ITA 2007 (indexation of basic rate limit) does not apply in relation to the basic rate limit, and
(b)
(b) section 57 of ITA 2007 (indexation of allowances) does not apply in relation to the amount specified in section 35(1) of that Act,
for the tax years 2022-23, 2023-24, 2024-25 and 2025-26.
Corporation tax charge and rates
6 Charge and main rate for financial years 2022 and 2023
(1) Corporation tax is charged for the financial years 2022 and 2023.
(2) The main rate of corporation tax—
(a)
(a) is 19% for the financial year 2022, and
(b)
(b) is 25% for the financial year 2023.
7 Small profits rate chargeable on companies from 1 April 2023
(1) Schedule 1 contains the following provision (with effect from 1 April 2023)—
(a)
(a) provision for corporation tax to be charged at the standard small profits rate on profits that are not ring fence profits,
(b)
(b) provision for marginal relief to be given by reference to the standard marginal relief fraction,
(c)
(c) provision making corresponding amendments to Chapter 3A of Part 8 of CTA 2010 (corporation tax rates on ring fence profits), and
(d)
(d) provision making other consequential amendments to provision made by the Corporation Tax Acts.
(2) For the financial year 2023—
(a)
(a) the standard small profits rate is 19%, and
(b)
(b) the standard marginal relief fraction is 3/200ths.
Rate of diverted profits tax
8 Increase in the rate of diverted profits tax
(1) In section 79 of FA 2015 (charge to diverted profits tax)—
(a)
(a) in subsection (2)(a) (which sets the rate in a standard case), and
(b)
(b) in subsections (3) and (3A) (which contain modifications of the rate in the case of ring fence profits or banking surcharge profits),
for “25%” substitute “31%”.
(2) The amendments made by this section have effect for accounting periods beginning on or after 1 April 2023.
(3) The remaining provisions of this section deal with a case where a company has an accounting period (a “straddling period”) beginning before 1 April 2023 and ending on or after that date.
(4) For the purpose of calculating the amount of diverted profits tax chargeable on a company for the straddling period—
(a)
(a) so much of the straddling period as falls before 1 April 2023, and
(b)
(b) so much of it as falls on or after that date,
are to be treated as separate accounting periods.
(5) If it is necessary to apportion an amount for the straddling period to the two separate accounting periods, the apportionment is to be made on a time basis according to the respective lengths of the separate accounting periods.
Capital allowances: super-deductions etc
9 Super-deductions and other temporary first-year allowances
(1) Part 2 of CAA 2001 has effect as if—
(a)
(a) in section 39 (first-year allowances available for certain types of qualifying expenditure only) a reference to this section were included in the list of provisions describing first-year qualifying expenditure, and
(b)
(b) in the Table in section 52(3) (amount of first-year allowances), at the end there were inserted—
“Expenditure qualifying under section 9(2) of FA 2021 |
130% |
Expenditure qualifying under section 9(3) of that Act |
50% |
Expenditure qualifying under section 9(4) of that Act |
100%”. |
(2) Expenditure is qualifying under this subsection if—
(a)
(a) it is incurred on or after 1 April 2021 but before 1 April 2023,
(b)
(b) it is incurred by a company within the charge to corporation tax,
(c)
(c) it is expenditure on plant or machinery which is unused and not second-hand,
(d)
(d) it is not within any of the general exclusions in section 46(2) of CAA 2001,
(e)
(e) it is not special rate expenditure, and
(f)
(f) it is not expenditure on the provision of plant or machinery for use wholly or partly for the purposes of a ring fence trade.
Expenditure qualifying under this subsection is referred to as “super-deduction expenditure” and a first-year allowance made as a result of expenditure qualifying under this subsection is referred to as a “super-deduction”.
(3) Expenditure is qualifying under this subsection if—
(a)
(a) it is special rate expenditure,
(b)
(b) it is incurred on or after 1 April 2021 but before 1 April 2023,
(c)
(c) it is incurred by a company within the charge to corporation tax,
(d)
(d) it is expenditure on plant or machinery which is unused and not second-hand, and
(e)
(e) it is not within any of the general exclusions in section 46(2) of CAA 2001.
Expenditure qualifying under this subsection is referred to as “SR allowance expenditure” and a first-year allowance made as a result of expenditure qualifying under this subsection is referred to as an “SR allowance”.
(4) Expenditure is qualifying under this subsection if—
(a)
(a) it is expenditure on the provision of plant or machinery for use partly for the purposes of a ring fence trade and partly for the purposes of another qualifying activity,
(b)
(b) it is incurred on or after 1 April 2021 but before 1 April 2023,
(c)
(c) it is incurred by a company within the charge to corporation tax,
(d)
(d) it is not within any of the general exclusions in section 46(2) of CAA 2001, and
(e)
(e) it is not special rate expenditure.
(5) A first-year allowance made as a result of expenditure qualifying under subsection (4) is to be allocated between the ring fence trade and the other qualifying activity on a just and reasonable basis.
(6) This section has effect as if it were contained in Chapter 4 of Part 2 of CAA 2001 (which, among other things, means that sections 5 and 50 of that Act are relevant for the purpose of determining when expenditure is incurred).
(7) For the purpose of determining when expenditure is incurred for the purpose of subsection (2)(a) or (3)(b), if an amount of expenditure is incurred as a result of a contract entered into before 3 March 2021—
(a)
(a) section 5 of CAA 2001 does not apply, and
(b)
(b) the expenditure is instead treated for that purpose as incurred when the contract was entered into (whether or not an unconditional obligation to pay it arises on or after that date).
(8) For the purpose of determining whether a person is entitled to a super-deduction or an SR allowance, section 67 of CAA 2001 (plant or machinery treated as owned by person entitled to benefit of contract, etc) applies as if for subsection (1)(b) of that section there were substituted—
“(b)
“(b) the expenditure is incurred under a contract in respect of which Conditions A and B in section 1129 of CTA 2010 (definition of hire-purchase agreement) are met on the basis that—
(i) the “goods” referred to in those conditions are the plant or machinery, and
(ii) the person to whom they are bailed or hired is the person who incurs the expenditure.”
(9) General exclusion 6 in section 46(2) of CAA 2001 (expenditure on provision of plant...
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