Budget 2021 – today’s headlines
Just under a year since Chancellor Rishi Sunak delivered his first budget, he today delivered a very different announcement. Taking a positive stance on rebuilding the economy after an unprecedented and difficult year, he continued to pledge to do “whatever it takes” to support the country through to the end of the pandemic. This included extending the deadlines for many of the existing support measures in place.
Despite the current level of debt, the Chancellor highlighted that the OBR forecast predicted a “swifter and more sustained recovery” than first thought.
From a tax perspective, personal and capital taxes remain largely unchanged. Business tax rates are not set to change immediately, but there is a roadmap in place for increases in tax for larger businesses and incentives to invest in the short term for all businesses.
Below are the key points that impact individuals and business owners. We will follow with more detailed information in the coming days.
Tax measures – key points
Personal Allowance – increases to £12,570 for 2021/22 but then remains fixed until April 2026. Higher rate threshold increased to £50,270 for 2021/22 – remains fixed until April 2026.
Capital Gains Tax (CGT) – no immediate change. The annual exemption remains at £12,300 fixed until April 2026
Inheritance Tax – the nil rate band and the residential nil rate remains fixed at £325,000 & £175,000 respectively until April 2026.
Stamp Duty Land Tax (SDLT) – the £500,000 nil-rate band will remain in place for a further three months until 30 June 2021. It will then fall to £250,000 – twice its normal rate – until the end of September 2021.
Corporation Tax (CT) – will increase to 25 per cent from 1 April 2023 for companies with profits of £250,000 or higher. There will also be a small company CT rate of 19 per cent for profits lower than £50,000, with tapering of the rate for profits in between.
Loss Relief – the loss carry back provisions will be extended from 1 year to 3 years; applying for two years from April 2020 but capped at £2m of losses per period.
Capital Allowances – a two year temporary “Super Deduction“ of 130 per cent for main rate assets such as plant and machinery (previously 18 per cent) as well as a 50 per cent first year allowance for special rate assets (previously 6 per cent). Applicable from 1 April 2021 to 1 April 2023. Assets must be new and unused.
100% business rates relief – for eligible retail, hospitality and leisure businesses this will continue for three months to 30 June 2021. There will then be a 66 per cent reduction in business rates for these businesses until 31 March 2022, capped at £2 million for businesses required to close on 5 January 2021 and capped at £105,000 for other businesses.
VAT reductions – the reduction from 20 per cent to five per cent on many goods and services in the hospitality and leisure sectors will be extended from 31 March 2021 to 30 September 2021. It will then move to an interim rate of 12.5 per cent until it reverts to 20 per cent in April 2022.
Coronavirus support measures
Coronavirus Job Retention Scheme (CJRS) – will be extended to the end of September 2021, with employers asked to contribute 10 per cent in July and 20 per cent in August and September
Support for the self-employed – to be extended until September. There are two new grants available: April 2021 applications open for grants worth up to 80 per cent of trading profits, capped at £7,500. July 2021 application open for a further grant. However, on the latter, only people whose turnover has fallen by 30 per cent or more will continue to receive the full grant (80 per cent of usual trading profits capped at £7,500). People whose turnover has fallen by less than 30 per cent, will have a reduced claim of 30 per cent of usual trading profits capped at £2,850.
Self-Employment Income Support Scheme (SEISS) – has now been extended for those who have submitted a 2019-20 Self-Assessment tax return allowing more people to be eligible.
New Recovery Loan Scheme – will be available to businesses of any size to apply for a loan of between £25,000 and £10 million backed by an 80 per cent Government guarantee
New Restart Grants – will be launched in April 2021, making one-off payments of up to £6,000 per premises for non-essential retail businesses and up to £18,000 for businesses in the hospitality sector and others that are reopening later.
Our extended budget report will be with you by the end of the week, when we have had more time to digest the detail. If you have any concerns or questions about how the budget may impact your tax position in the meantime, please contact your usual WMT tax specialist or Anne-Maree Dunn.