Tax adjustment for leased cars
The tax treatment of the leasing or hiring costs of cars differs to that of purchasing them. Lease/hire costs are deductible as revenue rather than capital expenses.
This is effective from 1 April 2021 for companies and 6 April for unincorporated businesses:
If your business leases a car or hires one for a period exceeding 45 consecutive days, and its CO2 emissions exceed 50g/km, the amount of tax deduction which can be claimed is 85% of the lease/hire charges. This applies from 1 April 2021.
For earlier contracts (not before April 2013) the 15% adjustment only applies where the car’s emissions exceed 110g/km.
It’s the date that the lease/hire contract commenced which determines the CO2 level at which the 15% adjustment applies.
2020/21 payroll reporting
From April 2021 you cannot submit an earlier year update to make amendments for the 2020/21 tax year. Instead, you’ll need to submit a further year to date FPS from 20 April 2021 onwards.
P11D and employers who provide medical benefits
Many firms have been liaising with medical providers, obtaining refunds on contributions for the past year as the services were not available. HMRC highlights that the benefit is the ‘cost less any refund related to that year, regardless of when it is received’. To avoid re-calculation and re-submission, contact the providers and obtain the refund so corrections don’t have to be made.
One-off £500 payment for eligible working households receiving tax credits
As part of the Spring 2021 Budget, the Chancellor announced a new one-off £500 payment to support working households receiving tax credits.
The one-off payment is for those households who, on 2 March 2021, were receiving either:
- Working Tax Credit; or
- Child Tax Credit and were eligible for Working Tax Credit but did not get a
payment because their income was too high to get Working Tax Credit payments.
There’s more information on the one-off £500 payment on GOV.UK.