BUDGET 3 MARCH 2021 – Key Points

BUDGET 3 MARCH 2021 – Key Points

With the UK having been adversely affected by the coronavirus (COVID-19) pandemic, Chancellor Rishi Sunak presented the 2021 Budget against a backdrop of ongoing economic hardship.

Measures to mitigate the impact of Coronavirus

  • Extension of the Coronavirus Job Support Scheme (‘furlough payments’) to September 2021 across the UK, with employer contributions to the salary from July
  • Fourth Self Employment Income Support Scheme grant covering February to April 2021 to claim from late April, similar to first three grants – and newly self-employed people who filed 2019/20 tax returns by 2 March may be eligible to claim for the first time
  • Fifth Self Employment Income Support Scheme grant covering May to September to be claimed from late July, varying in amount according to the fall in turnover during the pandemic
  • No further support announced for people working as directors through their own personal companies
  • 6-month extension of the £20 per week Universal Credit uplift, with an equivalent £500 grant to eligible Working Tax Credit claimants
  • Range of ‘Restart’ grants for businesses reopening after lockdown
  • Recovery Loan Scheme from 6 April 2021: government to guarantee 80% of eligible loans from £25,000 to £10 million to give lenders confidence to support UK businesses, with some other loan schemes coming to an end on 31 March 2021
  • Business rates holiday for eligible retail, hospitality, and leisure premises in England continues for the first 3 months of 2020/21, followed by a 66% discount for the rest of the year
  • 5% reduced rate of VAT for hospitality and leisure industry extended from 1 April to 30 September 2021, followed by 12.5% intermediate rate to 31 March 2022

Reliefs extended

  • Nil rate of Stamp Duty Land Tax on property transactions up to £500,000 extended from 31 March to 30 June 2021, with £250,000 threshold up to 30 September 2021
  • Duties on alcoholic drinks and fuel have frozen for the second year running

Tax year 2021/22

  • Small increases in main Personal Allowance, Basic Rate Band and National Insurance thresholds confirmed, as already announced
  • Lifetime Allowance for tax-advantaged pension funds, Inheritance Tax nil rate band, Capital Gains Tax annual exempt amount, ISA subscription limits all frozen at 2020/21 levels
  • No increase in CGT rates announced, contrary to some speculation in advance
  • Corporation Tax rate remains 19% until 31 March 2023
  • New ‘super deduction for investment by companies: 130% of qualifying expenditure on the general plant for two years from 1 April 2021 can be deducted from taxable profit (50% for ‘special rate’ assets, and cars are excluded)
  • Trading losses (up to £2 million) for companies and self-employed businesses to be carried back up to 3 years instead of the usual 12 months, making it possible to set current losses against pre-pandemic profits to obtain a repayment
  • Cap on Research and Development claims: payable tax credit not to exceed £20,000 plus three times PAYE & NIC liability
  • No significant changes announced to ‘off-payroll working’ (IR35) rules, which will apply to large and medium-sized private sector employers from 6 April 2021, as previously announced

Tax measures coming into effect later

  • Personal allowances and income tax rate thresholds frozen at 2021/22 levels until the end of 2025/26
  • Lifetime Allowance for tax-advantaged pension funds, Inheritance Tax nil rate band, and Capital Gains Tax annual exempt amount all frozen at their current levels until the end of 2025/26
  • VAT registration threshold fixed at the current level of £85,000 until 31 March 2024
  • Corporation tax rate on profits over £250,000 to increase to 25% from 1 April 2023, with the current 19% rate applying to profits below £50,000 and a tapering calculation on profits between £50,000 and £250,000
  • Establishment of ‘Freeports’ enjoying significant tax breaks announced in 8 areas of England, with further areas to be discussed with devolved administrations

If you would like more detailed, one-to-one advice on any of the issues raised in the Chancellor’s Budget speech, please do get in touch.