When the Chancellor, Rishi Sunak, delivered Budget 2021 yesterday and set out the UK Government’s plans for recovery, many of us probably felt we knew what to expect, thanks to the various leaks and announcements over the last few days.
Acknowledging the pandemic had “fundamentally altered” people’s lives, he said he would do “whatever it takes” to help. Although more than 700,000 people have lost their jobs and the economy has shrunk by almost 10%, the economy “will recover”.
Our highlights of the Spring Budget 2021 cover the main proposals. As always, the exact tax implications will be specific to your individual circumstances. If you would like more detailed, one-to-one advice on any of the issues raised in the Chancellor’s speech, please do get in touch.
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS) scheme, often referred to as the furlough scheme, will be extended until September 2021. Employees will still be entitled to 80% of their salary.
From April to June there will be no employer contributions beyond National Insurance contributions and pensions. From July 2021 businesses will be asked for a 10% contribution, rising to 20% for August and September.
Support for the self-employed (SEISS) will also continue until September 2021. A fourth SEISS grant will cover the period from February to April 2021, providing 80% of three months average trading profits, paid in one instalment and capped at £7,500. This can be claimed from late April.
For the fifth and final grant, which will cover the period from May 2021 to September 2021, the value of the grant will be determined by a turnover test. Individuals whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. Claims for the final grant can be made from late July 2021.
The Chancellor also announced an extension to those eligible for SEISS. It will now include those who have filed a 2019/20 tax return by midnight on 3 March 2021. This group will be entitled to claim the fourth and fifth grant.
Universal and Working Tax Credit
The £20 a week increase to Universal Credit will be extended by another six months, to provide further support for the poorest families.
Working Tax Credit claimants will receive a £500 one-off payment.
The Chancellor will double the incentive payments businesses receive for taking on apprentices to £3,000.
A new grant to “help businesses reopen and get going” was announced.
Under the Restart grant, non-essential retail businesses will receive grants of up to £6,000 per premises. Hospitality and leisure businesses, including personal care and gyms, will receive grants of up to £18,000.
Recovery Loan Scheme
The Recovery Loan Scheme will replace the existing Bounce Back Loans and CBIL/CLBIL schemes. Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year. The government will provide a guarantee to lenders of 80%.
Business Rate Holidays
Business rate holidays will be extended through to the end of June 2021. For the remaining nine months of the tax year, business rates will be discounted by two thirds, up to a value of £2million for closed businesses, with a lower cap for those who have been able to stay open.
The 5% reduced rate of VAT for companies in the hospitality and tourism sector is to continue until the end of September 2021. It will then increase to an interim rate of 12.5% for six months before it returns to 20% from April 2022.
For anyone buying properties in England and Northern Ireland, the current nil-rate band for stamp duty up to £500,000 will finish at the end of June rather than the end of March as originally planned. The nil-rate band will decrease to £250,000 until the end of September and will then return to the usual level of £125,000 from 1 October 2021.
A new mortgage guarantee scheme was announced where the government will guarantee loans of up to 95% for homebuyers who can only afford a 5% deposit. This new scheme is not restricted to first time buyers and will be available for homes up to a value of £600,000. Major lenders will begin to offer 95% mortgages from next month.
Statutory Sick Pay
Small & medium sized businesses will be able to continue claiming up to two weeks of eligible Statutory Sick Pay (SSP), for employees who have COVID-19, have symptoms of COVID-19 or are self-isolating due to COVID-19.
Help to Grow
A new “Help to Grow” scheme will be introduced to upskill organisations in business management and enhance businesses digital skills. The scheme will include subsidised business management courses and vouchers covering up to 50% of the cost of new productivity-enhancing software.
There will be eight “freeport” locations within England that are set to benefit from more generous tax reliefs, customs benefits and wider government support. These freeports will be able to begin operations from late 2021.
Corporation Tax on companies with chargeable profits over £250,000 will increase from 19% to 25% from 1 April 2023.
A tapered rate will apply to companies with profits between £50,000 and £250,000 and companies with profits below £50,000 will continue to be taxed at 19%.
A new “super-deduction” capital allowance of 130% will be available to companies who invest in qualifying new plant & machinery from 1 April 2021 until 31 March 2023.
There will also be a 50% first-year allowance available for qualifying special rate assets, during this period.
Annual Investment Allowance (AIA)
The AIA limit of £1million will continue to apply until the end of 2021. As the super deduction is not available to unincorporated businesses, they will be expected to continue to claim the AIA.
Both incorporated and unincorporated (ie. self employed individuals) businesses will temporarily be able to carry back losses by three years. The losses available to be carried back will be capped at £2million and will only be available during the 2020/21 & 2021/22 tax periods.
There is an increase in the rate of diverted profits tax from the current rate of 25% to 31% from 1 April 2023.
The VAT registration threshold of £85,000 and the deregistration limit of £83,000 will be frozen until 31 March 2024.
- no changes to the rates of income tax, national insurance or capital gains tax.
- personal allowance of £12,570 and the higher rate threshold of £50,270, will be frozen from 2022 to 2026. The income limit will also remain at £100,000.
- marriage allowance is increased to £1,260 for 2021/22.
- trading income and property income allowances remain the same at £1,000 each.
- CGT (Capital Gains Tax) annual exemption will remain at the level of £12,300 for individuals, personal representatives and some types of trusts for disabled people, and £6,150 for trustees of most settlements until 5 April 2026.
- inheritance tax threshold of £325,000 and IHT residence Nil Rate Band of £175,000 are frozen until 2026.
- the lifetime pension contribution allowance of £1,073,100, will be frozen until 2026.
- the annual subscription limit for adult ISA’s will remain at £20,000 for the year ended 5 April 2022 , with the limit for Junior ISA’s and Child Trust Funds remaining at £9,000 each.
Other Budget Highlights
- the National Living Wage will rise to £8.91 from April 2021.
- alcohol & fuel duty will be frozen for one year during the 2021/22 tax period.
- tobacco duties will rise by inflation plus 2%.
- contactless payment limit will rise to £100 later this year.
We have been working hard to ensure you are kept updated as the Government releases new information. We will continue to maintain our COVID-19 information webpage and this now reflects yesterday’s budget announcement.
We appreciate that there are still challenges ahead and we encourage you to contact us if you need support. You are not on your own during these extraordinary times and for everyone at GWA it is ‘business as usual’ when it comes to client support. If you have any concerns do not hesitate to get in touch. Please do share this information with family, friends or your own clients if you feel it will benefit them.