Finance Act 2021

Overview

The Finance Act 2021 is set out in 4 parts, where: 

• Part 1 covers the Income tax, corporation tax and capital gains tax. This also includes the setting of the Construction Industry Scheme
• Part 2 covers Plastic packaging tax
• Part 3 covers other taxes, including vehicle taxes and Landfill Tax
• Part 4 covers a range of miscellaneous taxes including taxes on Freeports

Each part includes details such as the rates that will be charged for 2021, and also references procedures and rules that are used in the application and recovery of the taxes detailed within. 

Notably, the Finance Act 2021 introduces the 'Plastic Tax' and sets out general rules for its application, including: 

• Charges that will be levied
• Definitions and Terms
• Exemptions and Credits
• Registration and the Register
• Administration and enforcement of the plastic tax
• Offences and Penalties

The Finance Act 2021 brings in measures to, among others, increase corporate taxes and diverted profit tax rates, as well as amend current finance legislation to a single standard. Key measures include the increases in the corporation tax rate to 25% from 2023 from the current 19% rate and a rise in the diverted profits tax rates from 1 April 2023, the new temporary 130% super deduction first year capital allowances, the temporary extension to the carry-back of trading losses for corporation tax for up to three years and a four-year freeze to income tax thresholds.

Furthermore, the Act legislates for tax changes announced at the Budget to support jobs and livelihoods, grants extensions to stamp duty and VAT cuts and new super-deduction effective from April 2021, with the aim of the changes taking effect to strengthen finances and secure investment-led recovery.