Budget Spring 2021 – The Tax Highlights
By: Lewis Trevelyan Business Tax, Capital Allowances, Individuals, Tax Updates
Coronavirus Support Measures
- The Coronavirus Job Retention Scheme (i.e. the furlough scheme) will be extended until the end of September 2021. Whilst there will be no change to the terms for employees, as businesses re-open employers will be asked to contribute. From July, they will be asked to contribute 10% of the cost of unworked hours, rising to 20% in August 2021.
- The Self Employment Income Support Scheme will also be extended until September 2021, with those who filed a 2019/20 Self-Assessment Tax Return now able to make a claim.
- Restart Grants will be available to businesses in England of up to £6,000 per premises for non-essential retail, and up to £18,000 per premises for hospitality, accommodation, leisure, personal care, and gym businesses.
- A new Recovery Loan Scheme will be made available to businesses looking to borrow funds of between £25,000 – £10 million. Businesses of any size can claim for the loan, and the Government will provide an 80% guarantee to lenders.
- The 100% Business Rates holiday for hospitality and leisure businesses will be extended until June 2021, with 66% relief available for a further 9 months, before ending on 31 March 2022.
- The 5% reduced VAT rate for hospitality, accommodation, and attractions across the UK will be extended until September 2021. An interim rate of 12.5% will then apply from 1 October 2021 for a further 6 months, before returning to the previous level of 20% on 1 April 2022.
- The standard Corporation Tax rate will rise from 19% to 25% from 1 April 2023 onward for companies with taxable profits exceeding £250,000. Companies with profits not exceeding £50,000 will continue to be subject to the 19% rate, with a tapering margin rate in place for companies with profits between £50,000 and £250,000.
- The VAT registration and deregistration thresholds will not change for at least 2 further two years.
- A new ‘Super Deduction’ Capital Allowances relief will be introduced, meaning that companies can deduct 130% of the cost for main rate assets (i.e. plant and machinery). Under the current rules, 100% of qualifying costs are deductible for plant and machinery up to £1 million, with a writing down allowance (WDA) of 18% on any excess.
- Investing companies can also benefit from a 50% first-year allowance (FYA) for qualifying special rate assets, including long life assets.
- The trading loss-carry back rule will be temporarily extended from the existing one year to three years, and is available to both incorporated and unincorporated businesses. The extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years.
- For periods starting from 1 April 2021, the amount of SME payable R&D tax credit that a company can receive will be capped at £20,000, plus 3-times the company’s total PAYE and NICs liability. The Government will also carry out a review of R&D tax reliefs, with a consultation published alongside the budget.
- The time-limited exception to Working Time Requirements for EMI schemes will be extended until 5 April 2022, meaning that employees who are furloughed or working reduced hours due to COVID-19 can still qualify for EMI shares.
- The rates of Income Tax and National Insurance Contributions (NICs) will remain at the current rates.
- The Personal Allowance will increase to £12,570 and the basic rate band will increase to £37,700 on 6 April 2021, however these rates will be frozen until April 2026. Therefore, from 6 April 2021 those with income not exceeding £50,270 will only be subject to income tax at the basic rate of 20%.
- The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 up to 2025/26.
- The Annual Exempt Amount for Capital Gains Tax will be frozen at £12,300 up to and including 2025/26.
- The Inheritance Tax Nil-Rate Band (£325,000) the Annual Exempt Amount for Capital Gains Tax (£12,300), and the Lifetime Annual Allowance for pensions (£1,073,100) have been frozen up to and including 2025/26.
- Social Investment Tax Relief (SITR) will continue to be available to April 2023.
- ISA limit will remain at £20,000 for 2021/22.
Stamp Duty Land Tax (SDLT)
- The reduced 0% SDLT rate on the purchase of residential properties up to £500,000 has been extended until 30 June 2021. The 0% band will then reduce to £250,000 until the end of September, before it returns to its normal level of £125,000 on 1 October 2021.
- A 2% SDLT surcharge will apply for non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.