New UK Taxes Explained 2021

New UK Taxes Explained 2021 – that will be the topic of this article.

As many of you might be aware, the UK has recently announced some new taxes.

This article will speak about them and speculate what taxes could be raised in the future.

Nothing written here should be considered formal tax advice, and the situation might change in the future, but we have done our best to make sure the information is accurate.

If you want me to answer any questions on Quora or YouTube, or you are looking to invest, don’t hesitate to contact me, email ( or use the WhatsApp function below.


The UK economy has gone through its biggest recession since hitting records in 2020, triggered by the coronavirus lockdown. While less serious than expected, GDP fell nearly 19.8% between April and June after three months of a forced lockdown across the UK.

The UK’s deficit was also growing and was estimated to be around £ 350 billion in 2020. In this case, the conversation turned to how it will be possible to pay off the debt when the economy eventually returns to normal.

One of the possible scenarios is tax increases. Some taxes are transferred to Wales. However, the Welsh government has yet to exercise its power to change the income tax rate to 10p a pound.

As a result, UK government should have raised its income tax to cover the cost of borrowing it took to fund the pandemic response. The Wales government will have the power to cut its share of the income tax, but this will have a strong impact on the money Wales had to fund public services such as hospitals and schools.

British Chancellor Rishi Sunak, below, levied various taxes to try and manage the deficit.

Leading economists have warned the UK government about the need to increase taxes for the highest and lowest income earners in order to reduce UK debt by proposing income tax, national insurance or VAT increases.

In September 2020, Ben Zaranko, a research economist at the Institute for Financial Research, said that the tremendous economic uncertainty surrounding the Covid-19 pandemic and the looming end of the Brexit transition make this a very difficult time for the Chancellor to develop government spending plans.

Covid-19 has thwarted previous spending plans, and departments have been allocated more than £ 70 billion this year for day-to-day expenses as part of the fight against the virus.

If some of these spending programs, such as the running costs of the NHS Test and Trace, are deplorable facts of life for years to come, they could consume huge amounts of money, and some government services will face a new round of budget cuts in their core services.

“To avoid this scenario, the Chancellor will need to raise billions of additional funds, paid at some point through higher taxes.”

Boris Johnson also said the income tax could go up, a change from an earlier pledge by his conservative government not to raise taxes for five years.

So what happens if the UK government decides to raise taxes, and what impact could this have on individual taxpayers?

Income tax

Income tax is one of the tax hike options offered to the UK government by the Institute for Financial Research, which said it may require an income tax increase of 6 or 7 pence per pound sterling earned to cover additional government spending.

The economists’ proposal is that tax increases should be applied to both the highest and lowest income recipients in order to cope with the record amount of government debt.

Economists also warned Chancellor Rishi Sunak of raising taxes this year, but said that should happen when the economy sees a steady recovery.

Whether the UK government decides to raise income taxes for the low-income may be an ongoing challenge for Conservatives, who pledged in 2019 that the Conservative government would not raise income taxes, VAT or national insurance for five years.

In addition, raising income taxes for low-income people could run the risk of losing newly recruited Conservative voters in traditional Labor seats in the north of England and elsewhere.


Another tax that conservatives pledged not to raise last year, VAT is one of the biggest sources of revenue for the UK government.

Between 2018 and 19, VAT brought the government £ 132 billion. This means that even a small increase can make a big difference.

Former Cabinet Secretary David Gauke said: “A £ 40 billion tax increase would be equivalent to a 7p increase in the base income tax rate or a 6% increase in VAT.”

But the VAT increase will be controversial. In July 2020, Rishi Sunak decided to cut VAT on hospitality and tourism from 20% to 5% to try to help the sectors hardest hit by the pandemic, another tax that the conservatives pledged not to raise in 2019 

Government insurance

An opportunity for public insurance is to increase the amount of contributions paid by self-employed people. Rishi Sunak is reportedly considering a 3% increase in national insurance premiums for the self-employed to pay coronavirus bills in the UK. National insurance contributions for self-employed people will increase from 9% to 12%, which will bring them in line with the contributions paid by workers.

Wealth tax

Workers have called for higher taxes for the rich to pay off the debt caused by the pandemic.

In July 2020, UK Shadow Chancellor Anneliese Dodds urged the government “not to raise taxes or cut support for low- and middle-income people” during the crisis. Potential wealth taxes could include an increase in inheritance tax or a “mansion tax,” which is a tax on high-value real estate.

So this was the situation and possible predictions made in 2020, yet this tax has yet to be brought in.

It is one of the contenders for most likely new taxes to be brought in in the next five or ten years, however.

What happened in fact?

On March 3, 2021 some of the UK taxes were discussed to be increased, which created a lot of discussions around it. Here we are to properly discuss, review and try to explain the reason UK decided this tax increase. 

For large tech companies and retailers operating in the UK, which have managed to significantly increase their sales in the face of the pandemic, and the British authorities were preparing new taxes so that the country’s budget can cope with the unprecedented burden of the last year. The UK Treasury had a meeting with representatives of major tech companies and retailers this month to discuss the introduction of a tax on online sales. 

At the request of the ministry, the Confederation of British Industry and the industry association TechUK brought companies together to discuss the “common risks and benefits” of such a tax. In addition, the newspaper reports, the government is developing proposals to introduce a one-time tax on excess profits for these companies.

Among those who may be affected by the government’s decisions are Amazon, Asos, Ocado, Just Eat, Deliveroo, as well as large supermarket chains and parcel delivery services. 

For example, Amazon sales in the UK grew 51% last year to £ 19.5 billion thanks to increased demand for online shopping and home delivery. 

At the same time, in 2019 the company paid corporate tax in the amount of only £ 14.5 million. In general, last year the share of online retail sales (excluding food and nutrition) increased from 31% to 46%.

A recent poll by Kekst CNC found that the public sees a tax on online sales as a convenient way to offset the costs of the pandemic. 

56% of respondents said they would like online retailers to pay more taxes. At the same time, neither one nor the other tax will yet be included in the budget, which were presented on March 3. 

The main theme of the budget will be the extension of short-term financial assistance in a pandemic. Finance Minister Rishi Sunak, who has channeled more than £ 300 billion in taxpayer funds to such aid, is supporting the introduction of the new taxes. “He acknowledges that the way we tax online sales now is killing physical stores and something has to be done about it,” an assistant minister told the newspaper.

NEWS: 04.03.2021 UK authorities raise taxes

Thus, the government decided to compensate for the budgetary losses associated with the pandemic. The Treasury Secretary of the United Kingdom presented in parliament a budget plan and a new package of measures to support the economy in the context of the coronavirus crisis.

£ 65 billion should help the UK economy recover from the crisis. These figures were presented by the head of the financial department Rishi Sunak. He announced the launch of tax “super deductions”.

The increase in taxes will affect mainly large businesses. So, in two years, the corporate tax in the kingdom will increase from 19 to 25%. Companies with an annual income of less than £ 50,000 will be able to pay at the old rate.

The 25 percent rate will only apply to businesses with an income of more than £ 250,000 per year. As for ordinary citizens – formally, no changes are expected in the rates of income tax, national insurance or VAT. At least for the next five years. But if the employee’s salary is about 50 thousand pounds per year or more, then the tax liability of the citizen will increase slightly.

Rishi Sunak, UK Finance Minister said, “The Office of Fiscal Responsibility expects the economy to return to its pre-pandemic level by the middle of next year. We will recover six months earlier than expected. This budget is current and includes a plan to protect the jobs and livelihoods of the British people.”

The government is providing business with more than £ 100 billion in aid in the face of the pandemic, so now is the time to ask it to contribute to the country’s recovery, the ministry said. 

The opposition, however, calls the proposal a temporary solution that will not get out of the financial hole. Skeptics also argue that businesses are not yet able to patch holes in the budget, and raising taxes before entrepreneurs recover from the coronavirus crisis could create problems for investment and the overall recovery of the UK economy. 

Note that during the pandemic, it experienced the worst recession in the last 300 years. The Office of Fiscal Responsibility estimates that in five years, UK GDP will be about 3% lower than it would have been in the absence of a pandemic.

What taxes will an LTD pay in the UK

Great Britain was considered one of the low-tax European countries. However, the local tax system cannot be called soft, but this does not stop entrepreneurs from other countries, who register companies in the UK. Anyone who is just thinking of opening a company on British soil will find it useful to know what taxes LTD pays in the UK. Let’s now get acquainted with taxes for LTDs.

Features of the UK tax system

National and regional taxes are part of the British tax system. The following taxes belong to the state taxes: on profit of enterprises, on income from oil, on income of individuals, on capital gains, on inheritance. National taxes make up the bulk of treasury receipts.

Businessmen who decide to open a company in the UK should take into account that if the profit was received in the British territory, then it is in any case taxed. Domiciled tax residents pay taxes on any profits made in the UK or any other territory. Taxes in the UK are calculated on the basis of reports that must be submitted to the fiscal authorities in a certain period. The tax year here begins on April 6 and ends on April 5 of the following year.

Features of the LTD company in the UK

This type of firm is a Limited Company or LTD, governed by the Companies Act 2006. The size of the standard authorized capital is 1,000 GBP. The minimum paid capital is 2 GBP. The so-called small companies are sometimes completely exempted from audits and submit financial statements in a simplified format. When a firm can be considered “small”:

  • the company employs no more than five dozen employees;
  • the size of the annual turnover – no more than 10.2 million GBP;
  • the size of the book value of assets – no more than 5.1 million GBP.

All LTD companies submit financial statements, submit a tax return, as well as a confirmation declaration. Find out more information about what LTD is in our article.

UK corporate tax for LTD

Corporate tax or income tax (as it is also called) must be paid by all resident companies that are registered in the UK and have a local legal address. The corporate tax rate until April 2020 was 19%. Today the rate has dropped to 17%. In some cases, the amount of corporate tax can be reduced to 10%.

Dividends received by a company from other firms in the UK or any other country are usually not taxable (subject to certain rules). There are more stringent requirements for small recipient companies, and this should be taken into account.

Tax reporting and audit in the UK

If the partnerships LP and LLP are not required to submit reports, then the limited liability company, which is the LTD company, must report on finance every financial year. On the basis of these reports, the amount of the obligatory tax is determined. It is worth remembering that if a company has been operating only for the first year, then it must submit reports not after 12 months, but after 18 months. Fines are expected to be charged for late filing of reports. The amount of penalties starts from GBP 150.

Value added tax VAT or VAT number

VAT is one of the main taxes in the UK. It can be local VAT or electronic European VAT. Local applies to services and goods sold by the company in the UK or sourced from Europe. In the UK, there are three types of local VAT rates: 3.0% – zero rate; 2.5% – reduced rate; 1.20% is the standard rate.

Not all goods and services are subject to local VAT. So, if the company’s turnover for the financial year exceeded 79,000 pounds sterling or, according to forecasts, will soon exceed it, then local VAT will have to be paid.

In what cases it is not necessary to register a VAT number for a company in the UK:

  • the company sells goods outside the UK, that is, these products are not imported into the UK;
  • services are provided to customers outside the EU, and the place of sale of these services is not the UK;
  • another British firm renders services to this LTD.

It is worth remembering that digital service providers are subject to European VAT in any case, according to the decree of January 1, 2015.

Double taxation

To date, the UK has signed over a hundred double taxation treaties. This agreement simplifies the exchange of information related to tax payments. Example of income covered by the agreement:

  • wages are taxed only in the country of which the recipient is a resident.
  • business profits are taxed only in the country where the business is based.
  • capital gains, when it comes to, for example, real estate, will be taxed in the country where the property itself is located. If it comes to capital gains on movable property, then taxes will be calculated in the country of residence of this individual.

The world is going through the biggest recession

Let’s now leave the UK taxes and discuss something more important, which will definitely touch everybody’s wallet. At the moment all the countries are suffering from a 2020 virus called COVID-19.

It brought various problems except for health ones. Many powerful and strong countries are now in a labyrinth trying to get out of this economical bad situation, which had a more logical solution – tax increase. The UK government, about what we talked above, already used this solution.

Predicting tax revenues in the current COVID-19 pandemic is challenging. The use of traditional forecasting approaches based on the simple dynamism of the tax system or the elasticity of macroeconomic indicators is likely to underestimate the decline in income. 

Since the current shock manifests itself differently in different sectors and depending on the size of enterprises, more reliable results can be obtained by disaggregating the forecast of income by sector and type of taxes, based on the information available for each sector. As new information becomes available about the pandemic and the response, projections should be updated accordingly.

In most countries, the COVID-19 coronavirus pandemic will lead to a significant reduction in tax revenues. This is directly related to the decline in economic activity, and indirectly to the response measures of tax policy and administration. 

The consequences for households and businesses will lead to a disruption in economic activity that is unique to the current crisis. 

For example, the need for social distancing is reflected in different ways in the tax base, tax administration and taxpayer compliance. In addition, a pandemic could have a more lasting impact on the structure of the economy. 

The external sectors of the economies of some countries may also be hit, leading to depreciation or devaluation of currencies, as well as possibly affecting tax revenues. The manifestation of such an impact will depend on the structure of the economy.

So this means each country should be ready for tax changes, since not only people suffer, but also the economy of the country in which we live. Many countries can follow the example of the UK and in the near future the tax system may be changed. 

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Further Reading

In the article below, taken from my online Quora answers, I answered the questions of readers including on the follow subjects:

  • Are tech stocks in free fall? I discuss why that is wrong, and the Nasdaq has actually risen this year.
  • What is the biggest indication of business success?
  • Is investing really only for richer people? I tackle that misconception.
  • How can you look wealthy without spending much money? 
  • What are some of the most undervalued investments right now?

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