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Budget 2021

Budget 2021 Budget 2021
 

Rishi Sunak has chosen a fine line between raising taxes to start paying down the massive Government borrowings but at the same time stimulate economic recovery and save jobs
 
Maybe he will delay the announcement of significant increases in taxation until later in the year as it is anticipated that there will be a further Budget in the Autumn. By then the economy will hopefully have started to bounce back.

We have provided below an overview of each of the significant areas. Please get in touch with us if you would like to discuss any of these further.


CJRS FURLOUGH SCHEME EXTENDED TO 30 SEPTEMBER
 
The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working but it will then be limited to 70% for July and then 60% for August and September.
 
This phased reduction will operate in a similar way as in September and October 2020 with the employer being required to contribute the remaining 10% and then 20% of an employee’s regular pay so that they continue to receive 80% pay for furloughed hours.
 
In addition to the 10% and 20% contributions employers will continue to be responsible for paying employers national insurance and pension contributions on the full amount being paid to employees.


SELF-EMPLOYED INCOME SUPPORT GRANTS ALSO EXTENDED
 
The support will continue to be 80% of average profits for the reference period capped at £2,500 a month and can be claimed from late April. There will then be a fifth SEISS grant covering the 5 months to 30 September.
 
Those who commenced self-employment in 2019/20 will now be included provided they had submitted their 2019/20 tax return by 2 March 2021. This is potentially a further 600,000 traders.
 
Conditions for the fifth grant will be linked to a reduction in business turnover. Self-employed 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 £2,500 a month. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £950 a month. We are awaiting further details of this fifth grant.


CORPORATION TAX RATES TO INCREASE TO 25% BUT NOT FOR ALL COMPANIES
 
The UK corporation tax rate is currently one of the lowest rates of the G20 countries and the government states it is committed to keeping the rate competitive.
 
 
The rate will increase to 25% from 1 April 2023 where profits exceed £250,000. However, where a company’s profits do not exceed £50,000 the rate will remain at the current 19% rate and there will be a taper above £50,000. Businesses will however be able to take advantage of new tax breaks to encourage investment in equipment and an enhanced carry back of losses.


SUPER-DEDUCTION FOR INVESTMENT IN NEW EQUIPMENT
 
In order to encourage companies to invest in new capital equipment the chancellor announced a radical new “super-deduction” of 130% where they invest in new plant. This would mean that when a company buys plant costing £10,000 they would qualify for a £13,000 deduction in arriving at business profits. The new deduction, which will run for two years from 1 April 2021, will not be available for motor cars. Certain assets such as fixtures in buildings will only qualify for 50% relief in the first year instead of the normal 6% writing down allowance.


THREE YEAR CARRY BACK OF TRADING LOSSES
 
Many businesses will have made a loss in the last year as a result of the Coronavirus pandemic and the difficult trading environment.
Trading losses can normally only be set against profits of the preceding accounting period or previous tax year in the case of unincorporated businesses.
 
The carry back period will be temporarily increased to three years thereby enabling the business to obtain a tax refund. For companies this will apply to loss making accounting periods ending in the period 1 April 2020 to 31 March 2022. For unincorporated traders, the extended loss relief will apply to losses incurred in 2020/21 and 2021/22.


NO CHANGES TO INCOME TAX RATES AND PERSONAL ALLOWANCE FROZEN
 
The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000.
 
The personal allowance and higher rate threshold have been increased in line with inflation to £12,570 and £50,270 respectively for 2021/22. These thresholds will then be frozen until 2025/26.


NATIONAL INSURANCE RATES
 
Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,570 of earnings for 2021/22, an increase of £1 a week. The employee contribution rate continues to be 12% up to the Upper Earnings limit £50,270, with the self-employed paying 9% on their profits up to the same level. Note that employer contributions will apply to earnings over £170 per week, £8,840 per annum which is also a £1 a week increase.
 

5% VAT RATE FOR FOOD, ATTRACTIONS AND ACCOMMODATION EXTENDED
 
The reduced 5% rate of VAT will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK until 30 September 2021.
 
The 5% reduced rate of VAT will also continue to apply to supplies of accommodation and admission to attractions across the UK.
From 1 October until 31 March 2022 the rate will be set at 12.5% and will then revert to 20% from 1 April 2022.
 

VAT REGISTRATION LIMIT FROZEN AT £85,000 UNTIL 1 APRIL 2024
 
The VAT registration limit normally goes up each year in line with inflation but will remain at £85,000 for a further two years. Arguably this makes it easier for businesses to assess whether or not they are required to register for VAT as it is no longer a moving target.
 

MAKING TAX DIGITAL EXTENDED TO ALL VAT REGISTERED BUSINESSES FROM 1 APRIL 2022
 
The government has confirmed that the requirement to maintain accounting records in a digital format and submit the data to HMRC electronically will be extended to all VAT registered businesses from 1 April 2022 regardless of the level of taxable supplies.
 

NEW GRANTS FOR HIGH STREET BUSINESSES AND HOSPITALITY SECTOR
 
Businesses forced to close due to the Coronavirus lockdown will be eligible to apply for grants of up to £18,000 depending upon the rateable value of their business premises. Pubs, restaurants, hotels, gyms and hairdressers will be eligible for a grant of up to £18,000 per premises whilst non-essential retail businesses will be eligible to apply for a grant up to a maximum of £6,000.
 
The government will also continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1 April 2021 to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021.
 
 
NEW RECOVERY LOAN SCHEME
 
The government have already announced a longer repayment period for “Bounce-back” and CBIL loans. From 6 April 2021 a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses.
 

SDLT THRESHOLDS EXTENDED
 
This has now been further extended until 30 June 2021 so that transactions in progress will continue to benefit from the reduced rates.

From 1 July 2021 the Nil Rate Band of Residential SDLT will then decrease to £250,000 for 3 months until 1 October 2021 when it will revert to £125,000 for purchases completed on or after that date. There has been no change to the SDLT rates above the Nil Rate Band. The 3% supplementary charge for second and subsequent homes will continue to apply.


5% MORTGAGE SCHEMES EXTENDED
 
Another measure announced to stimulate the housing sector is a new 95% mortgage scheme guaranteed by the government that will mean that people buying a house will only need a 5% deposit where the purchase price is no more than £600,000.
 

APPRENTICESHIP SCHEMES EXTENDED
 
The current apprenticeship scheme will be improved with payments of £3,000 to employers in England for each new apprentice they hire aged under 25 and continue to pay the employer £1,500 for each new apprentice they hire aged over 25. The schemes will now run until 30 September 2021.
 
Starting in January 2022 there will be a new “flexi-job” apprenticeship which will allow individuals to work for more than one company via an agency.
 
The “Kickstart” Scheme announced in the Summer 2020 Plan for Jobs will continue to be available for the 2021/22 academic year to create 6-month work placements aimed at those aged 16-24 who are on Universal Credit and at risk of long-term unemployment. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
 

EIGHT NEW FREEPORTS ANNOUNCED
 
In eight locations around England there will be generous tax breaks to encourage businesses to locate there. These tax breaks include an exemption from SDLT, 100% first year allowances on plant and a 10% per annum structures and buildings allowance.

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Read 366 times Last modified on Friday, 05 March 2021 07:30
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