The Budget 2021 – The details you need to know

Today’s budget, the second presented by the current Chancellor Rishi Sunak, unveiled the Governments plans to boost the British economy, following the UK’s biggest economic slump in 300 years.

As a result of the devastating effect Covid 19 has had on not only our lives, but the British economy as a whole, the country has seen public borrowing reach its highest level ever in December 2020. This level of borrowing will grow as the Government continue to protect the jobs and livelihoods of the British people. 

Unemployment is at its highest rate since 2016 and is a key area of concern.

The Chancellor warned the total cost of Britain’s coronavirus response will reach £407 billion by the end of next year. This includes an anticipated extra £65 billion in continued support over the coming 6 months. 

The Chancellor also warned that the country will soon need to start the difficult process of fixing public finances. 

Below is a summary of the key points announced by the Chancellor in the 2021 Budget on Wednesday 3 March 2021.

Business Tax 

Corporation tax rates

Corporation Tax will remain at 19% until 31 March 2023. It is believed that from 1 April 2023 the country will be in recovery and the main rate of corporation tax will rise from 19% to 25%.

Companies, with profits under £50,000 will still benefit from the lower rate of tax – 19%. Regardless of this increase this is still the lowest rate of corporation tax in the G7.

The tax rate for companies with profits between £50,000 and £250,000 will be tapered, meaning only companies with profits exceeding £250,000 will pay the full rate of 25%. It is anticipated that this will be only 10% of companies. 

Companies will be able to carry back losses of up to £2 million for three years.

Capital Allowances

From 1 April 2021 until 31 March 2023, a new ‘super deduction’ will be introduced to encourage corporate entities to continue to invest in qualifying new plant and machinery. This will be at 130% of the investment cost. This deduction will cut company tax bills by up to 25%, making the UK capital allowance system one of the most competitive in the world. 

Businesses will also see the benefit of a 50% first-year allowance for qualifying special rate assets. 

Further detail will follow on this topic, in relation to the interaction with the current annual investment allowance and superdeduction

Business rates and grants

• The government have announced that, theone-yearbusiness rate holiday announced from 1 April 2020, will continue until 30 June 2021
• Businesses will also see the benefit of a discount of up to2/3 for the remainder of the 2021/22 year, saving thousands for small business 
• A ‘Restart Grant’ of £5 billion is being introduced to support businesses that have had to close due to the lockdown restrictions. Non-essential retail, due to reopen in April, will be able to claim up to £6,000 per premises. The largest businesses based upon rateable value, in the hospitality and leisure sector, personal care providers, including gyms will be able, if eligible, to claim up to £18,000. The grants are there to support businesses whilst they remain closed.

Apprentice scheme

The cash incentive for employers taking on new apprentices has been boosted from £1,000 per employee to £3,000 per employee

VAT

The reduction of vat to 5% for the hospitality, accommodation and attraction sectors will be extended until 30 September 2020, increasing to 12.5% for a further six months to 31 March 2022.

The compulsory VAT registration limit is frozen at £85,000 per annumuntil March 2024

Recovery Loan scheme

The scheme is in place to replace the Bounce Back and Business Interruption loans. The loans will be guaranteed up to 80% and are loans between £25,000 and £10 million. 

Self employed

Self Employed Income Support Scheme

A fourth grant will be available and run from February to April. This will cover up to 80% of three months trading profit, up to a maximum of £7,500.

There will be a fifth grant covering May to September. 

This will be based upon the reduction in your turnover. For the self- employed whose turnover has fallen by 30% or more, they will receive the 80% grant. For those whose turnover fell by less than 30%, grants will be reduced to 30%. 

Until now, those who were self-employed after 6 April 2019 were not eligible for the grants. This is being widened and access to grants will be made available to an estimated further 600,000 self-employed people. 

To be eligible they would have needed to file their tax returns for 2019/20 by midnight on 2 March 2021.

Employment 

Furlough extension

One key announcement to support the Chancellors policy of ‘protecting people’s jobs and livelihoods’ was the welcome extension to the furlough scheme. 

It was announced that the scheme, which has protected an estimated 11 million jobs since it was introduced last March, will continue until 30 September 2021. 

Furloughed employees will continue to receive 80% of their wages up to a maximum of £2,500 per month.

From July, employers will be expected to pay 10% towards this, reducing the claim to 70% and for August and September this will increase to 20%, claiming 60% from the Government.

Tax thresholds

It has been confirmed that there will be no changes to income tax rates and National Insurance. The current rates will remain frozen until April 2026.

Inheritance tax thresholds will also remain frozen for five years at £325,000. The ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2020/21 this is £175,000. Thereafter it will rise in line with CPI.

Pension lifetime allowance will remain frozen for five years.

Employment Allowance

The employment allowance provides employers with relief from their obligation to pay employers NIC.

From 6 April 2021, employers whose NIC bill was below £100,000 in the previous tax year will receive an allowance of £4,000

National Minimum wage

From 6 April 2020 these are increased as follows:

• £8.91 for over 25-year olds
• £8.36  for 21 to 24 year olds
• £6.56 for 18-20 year olds
• £4.62 for under 18’s

• £4.30 for apprentices under 19 and for those over 19, but in their first year

Stamp Duty Land Tax 

The Stamp Duty holiday will be extended for three months to 30 June 2021. Houses purchased from under £500,00 will attract a Nil rate of stamp duty. From 1 July this will be reduced to properties costing up to £250,000 returning to the original limit of £125,000 on 1 October 2021

Personal Tax 

The personal allowance

The personal allowance will increase to £12,570 for 2021/22 and will be frozen at this level until April 2026.

Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026

Taxpayer Protection Taskforce

A Taxpayer Protection Taskforce is being created to crack down on fraudsters exploiting government support schemes.

Chancellor Rishi Sunak allocated £100m for the taskforce in his Budget on Wednesday, following concerns of fraud in the government-backed loan schemes, particularly the bounce back loan scheme (BBLS).

Capital Gains Tax

In recent months there has been a high level of speculation that there would be changes to Capital Gains Tax in the 2021 Budget, to assist in funding the borrowing brough about due to Covid 19. 

Today’s budget took a surprising turn and did not see any imminent changes. 

It had been predicted that the capital gains tax rates would be increased to mirror income tax rates, but this did not happen.

There were no Capital Gains Tax changes and the CGT annual exemption and was also frozen until 2026.

As with any new tax legislation, the devil is in the detail and each case needs to be looked at individually to determine the outcome. If you wish to discuss the above, please contact the team at Spirare Limited.