Budget 2021: What has been announced?

Today the Chancellor, Rishi Sunak, presented his second budget very much recognising that we are still in the depths of the pandemic and that the Government must continue to support the economy. He did however set out a timetable for a number of future tax rises.

 

1. Taxation

Personal Taxation

• No changes to rates of income tax, national insurance or VAT
• Income tax personal allowance will remain at £12,570 from April 2022 until April 2026.
• Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026
• Inheritance tax thresholds will be maintained at their current levels until April 2026.
• The Lifetime Allowance will be maintained at its current level of £1,073,100 until April 2026.
• The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.

 

Capital allowances - Super deduction

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

• a 130% super-deduction capital allowance on qualifying plant and machinery investments
• a 50% first-year allowance for qualifying special rate assets

 

Extension of Loss carry back rules

The ability to carry back trading losses will be extended from the current one year entitlement to a period of 3 years, with losses being carried back against later years first.

 

Companies will be able to carry back losses made in accounting periods ending between 1 April 2020 and 31 March 2022.

 

Unincorporated businesses will be able to carry back losses made in tax years 2020/21 and 2021/22.

 

Corporation tax increases

From April 2023, corporation tax will increase from the current rate of 19% up to 25% for businesses with profits greater than £50,000. If profits are less than £50,000 then businesses will continue to pay corporation tax at a rate of 19%. Only businesses with profits in excess of £250,000 will pay the full 25% rate. A taper will be introduced for businesses with profits between £50,001 and £250,000.

 

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2. Coronavirus support

Coronavirus Job Retention Scheme (CJRS)

The CJRS will be extended to September 2021 across the UK.

• • From July, employers will contribute 10% of the 80% furlough payment.
  • In August and September, employers will contribute 20% of the 80% furlough payment.

 

Self-employed Income Support Scheme (SEISS)

Two additional SEISS grants have been announced and eligibility for both grants will now include an individual’s 2019/20 tax return. This means that the grant will potentially be available for all newly self-employed individuals that had missed out on the earlier SEISS grants due to not having previously filed a 2018/19 return.

The first grant will cover the period February 2021 to April 2021, be worth up to £7,500 and can be claimed from late April 2021.

The second grant will cover the period May 2021 to September 2021 and will be worth up to £2,850 or up to £7,500 depending on the extent to which the business has been impacted.

 

Restart Grant Scheme

Restart grants for businesses reopening from the lockdown:

• Non-essential retail opening in April 21 will receive up to £6,000 per premises

• Hospitality, accommodation, leisure, personal care and gym businesses will receive up to £18,000 per premises

 

Recovery Loan Scheme

The Recovery Loan Scheme will provide loans to all sizes of business which are 80% government guaranteed. The scheme will run from 6 April until 31 December 2021.

What can you borrow?

• Term loans and overdrafts will be available between £25,001 and £10 million per business.
• Invoice finance and asset finance will be available between £1,000 and £10 million per business.

Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

 

Extension of reduced rate of VAT for hospitality and leisure

There will be an extension to the reduced VAT rate of 5% for hospitality, accommodation and attractions across the UK until the end of September. This will be followed by a 12.5% rate for a further six months until 31 March 2022.

 

Business rates holiday

Businesses in the retail, hospitality and leisure sectors will receive a 3-month extension of business rates relief at 100% until June 2021. Then from July 2021 rates will be discounted by two-thirds of the normal charge.

 

Extension of Stamp Duty Land Tax (SDLT) cut

The temporary increase to the SDLT nil rate band will be extended for properties up to the value of £500,000 until June 2021 or until September 2021 for properties up to the value of £250,000.

 

Universal credits and Working Tax Credits

There will be a 6 month extension of the £20 per week Universal credit uplift in GB and a one-off payment of £500 to eligible WTC claimants across the UK.

 

Test and Trace payments

The £500 Test and Trace support payments in England will continue to be made until the summer.

 

Statutory Sick Pay (SSP)

Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.

 

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3. Economy and Jobs

• Mortgage guarantee scheme will increase the availability of 95% Loan-to-value mortgage products enabling a 5% deposit for all UK homebuyers up to £600,000.
• Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000 per hire.
• £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
• Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021/22 academic year.

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4. Other announcements

• £100 million for a new Taxpayer Protection Taskforce to crack-down on COVID fraudsters who have exploited UK Government support schemes.
• Fuel and alcohol duty to be frozen for the year.
• Legal limit for single contactless payments, increase from £45 to £100.