Finance

Budget Update – 3rd March 2021

By March 5, 2021 No Comments

The Chancellor set out the Spring Budget on Wednesday.   Alongside measures to support the UK’s long-term economic recovery, he set out plans to help business and jobs through the pandemic, as well as a series of tax-raising initiatives to help rebalance the public finances.

What are the key headline items I need to know for my business?

  • Furlough to be extended until the end of September 2021. Employers to be asked to contribute 10% in July and 20% in August and September.
  • For qualifying capital expenditure from 1 April 2021 to 31 March 2023 there is a first-year allowance of 130% on most new plant and machinery investments. 
  • A new recovery loan scheme is being launched and you can still apply if you’ve taken a BBL or CBILS already.
  • Increases in Corporation Tax from 19% in 1st April 2023 as follows:
    • Profits up to £50,000 = 19%
    • £50,001 to £100,000 = 20%
    • £100,001 to £150,000 = 21%
    • £150,001 to £200,000 = 22%
    • £200,001 to £250,000 = 23%
    • Profits over £250,001 = 25%
  • Tax treatment of losses – businesses can carry back losses of up to £2m for up to 3 years
  • Super deduction – businesses can offset 130% of costs of investments from taxable profits for the next 2 years

For a more comprehensive review, read on… 

Business Tax

Corporation Tax

  • Company owners will be relieved that there are no imminent increases in corporation tax rates until April 2023. From 1 April 2023, there will be two rates of corporation tax:
    • Taxable profits up to £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
    • Taxable profits in excess of £250,000 will be taxed at 25%
    • Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.
  • Tax treatment of losses – businesses can carry back losses of up to £2m for up to 3 years

Capital allowances

  • For companies within the charge to corporation tax, increased allowances for expenditure on plant and machinery will apply temporarily.
  • For qualifying expenditure incurred from 1 April 2021 up to and including 31 March 2023, companies will be able to claim:
    • a super-deduction providing a first year allowance of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
    • a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances. 

Research & Development (R&D)

  • An R&D tax credit cap has been introduced, limiting companies claim to £20,000 plus three times the company’s total PAYE and NI liability. This will apply for periods beginning on 1 April 2021 onwards.
  • Companies with R&D performed by subcontractors, as opposed to their own employees, should consider reviewing the structure of their workforce to ensure they make the most of the R&D tax credit.

Other business measures:

  • Incentives for firms to take on apprentices to rise to £3,000 from £2,000
  • Business rates holiday for firms in England to continue until June with 75% discount after that.
  • New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas.
  • The business rates holiday in England has been extended by an additional three months.
  • Legislation in the Finance Bill 2021 will reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have effect on and after 6 April 2021.

Personal tax

  • Increase of the Personal Allowance from £12,500 to £12,570 from April 2021, frozen until 2026
  • Increase of the Higher Rate Threshold from £50,000 to £50,270 from April 2021, frozen until 2026
  • The National Living Wage will rise to £8.91 from April 2021
  • Freeze on tax rates

Other Taxes/Duties

  • Freeze on alcohol duty
  • Freeze on fuel duty
  • Freeze on VAT threshold (£85k)
  • Freeze on Inheritance Tax, Pensions and annual Capital Gains Tax exempt amount

Housing Market

  • Stamp Duty Holiday extended:
    • nil rate up to £500,000 until end of June 2021
    • nil rate up to £250,000 1st July 2021 – 30th September 2021
    • nil rate up to £125,000 will return from 1st October 2021
  • Mortgage guarantee for 95% loan to value mortgages

Coronavirus Support & Other Grants

  • Furlough (CJRS) extended until end of September – 80% due to employees for the hours they’ve not worked, with businesses contributing 10% in July, and 20% in August and September
  • Restart Grants from April to help businesses re-open – up to £6000 for non-essential retail and up to £18000 for hospitality and leisure businesses (via your local councils as before)
  • Recovery Loan Scheme – businesses of any size can get loans from £25k to £10m through to the end of this year with a Government Guarantee of 80% (more details to come!)
  • Business Rates holiday extended til June 2021, with a discount for the remainder of the year
  • VAT Reduction for Hospitality and Tourism – 5% to be extended to 30th September, then interim rate of 12.5% for 6 months, back to standard 20% April 2022
  • Furlough (CJRS) extended until end of September – 80% due to employees for the hours they’ve not worked, with businesses contributing 10% in July, and 20% in August and September
  • Restart Grants from April to help businesses re-open – up to £6000 for non-essential retail and up to £18000 for hospitality and leisure businesses (via your local councils as before)
  • Recovery Loan Scheme – businesses of any size can get loans from £25k to £10m through to the end of this year with a Government Guarantee of 80% (more details to come!)
  • Business Rates holiday extended til June 2021, with a discount for the remainder of the year
  • VAT Reduction for Hospitality and Tourism – 5% to be extended to 30th September, then interim rate of 12.5% for 6 months, back to standard 20% April 2022

 

In summary, the tax rises weren’t as extensive as we were expecting.  There is help for businesses to get through the remainder of the pandemic and recover from it.   The Autumn Budget will inevitably bring more tax rises, but for now let’s celebrate the small wins!