The Budget 2021 – Building for the Future

Latest Tax Announcements – The Budget 2021

How is the Rishi Sunak social media train going to repay the £300bn cost of the COVID-19 pandemic to the UK most of us were asking up until this afternoon? A tax on tweets could probably cover the cost within a few days!

There was much speculation about which taxes the Chancellor was going to raise, would the rates of income tax be frozen (therefore pushing more people into the higher rate tax bracket over the rest of this government’s term), would capital gains tax be raised to be taxed on top of income, is Corporation Tax going to be raised, our friends in the US are doing just that! Will there be a new tax to help his neighbour at No.10 pay for the renovations planned for the 300 year old, 100+ room property?

In the Spring 2020 Budget, our fresh faced Chancellor stood up in Parliament and advised that he would provide the NHS with whatever it needed to cope with the crisis “Whatever it cost”! None of us anticipated that the total cost of the pandemic (and we are not even out of it yet) would exceed £300bn when a package of £12bn was announced to deal with the pandemic. Since then the Treasury cheque book has been well and truly hammered.

Our Chancellor stood up at 12.35pm in a socially distanced house of Commons surrounded by his colleagues and opposition all masked up as is the new norm.

The ‘Maharaja of the Dales’ also announced various investments drives in his area of the country. The UK Infrastructure Bank with £12bn to invest in public and private sector projects is to be located in Leeds with devolution of government power heading to Yorkshire also!

Where was the mention of Key Workers and the NHS that have been central to the government efforts to ensure that the nation did their bit to stem the pandemic? There was none at all!

The Budget 2021 announcement was very business focused and really none of the major announcements surprised the Tweeting population of the country, as they had been leaked in the days leading up to the Budget.

The major announcements were:-

COVID-19 Support – What the Chancellor is giving away!

Furlough Scheme

This will continue until the end of September 2021. This remains broadly the same as the current support in place. Businesses will be asked to contribute 10% of the cost in July and 20% in August and September respectively.

Self-Employed Support

This will be extended until September 2021. The fourth grant covering Feb 2021 to April 2021 will be a grant of up to 80% on average trading profits up to a maximum of £7,500. The fifth grant of a lower amount will be available from May 2021.

Universal Credit

The universal credit uplift of £20 per week will continue until September 2021, this will be paid as a one-off payment of £500.

Recovery Loan Scheme

Businesses of any size can apply for a loan of £25k to £10m following the end of the CBILS and Bounce Back Loan Schemes. These will be 80% government guaranteed and will be for up to 6 year terms.

Invoice finance will also be available under schemes for £1k to £10m for up to three year terms.

VAT

For the hospitality, accommodation and attractions sector the 5% rate will continue till September 2021 and then a rate of 12.5% will follow for a further 6 months.

Retail, Hospitality and leisure – Restart Grant

There will be restart grant of £6,000 per premises for non-essential retail business.

While a restart grant of £18,000 per premises will be paid to hospitality and leisure businesses.

Business Rates

The business rates holiday is extended to the end of June 2021. Then for the next 9 months this will be discounted by 2/3 (up to £2m per business) for closed businesses, with a lower cap for those that have been able to stay open.

Homes

The SDLT £500k nil-rate band will continue till 30 June 2021 and will then be tapered down to £250k till 30 Sept 2021.

A new mortgage guarantee scheme will be introduced to help UK home buyers purchase a property for up to £600k with a government backed 95% mortgage.

How will the nation pay for all of this?

Income Tax

The current Personal Allowance of £12,500 is frozen for 2021/2022 with a small increase to £12,570 in 2022/2023 up to 2026.

The threshold for higher rate tax will be frozen at £50,000 for 2021/2022 with a small increase to £50,270 in 2022/2023 up to 2026.

This is expected to raise £6bn per year.

Corporation Tax

The rate of Corporation Tax will increase from 1 April 2023 from the current rate of 19% to 25%.

There was relief in the announcement for small businesses with the introduction of the small profit rate of 19% for businesses making profits of less than £50k.

It will not be a cliff edge drop for businesses that make more than £50k profit per annum, there will be a tapered rate between 19% and 25% for businesses making profits of between £50k and £250k.

This is not the first time the UK has seen varying rates of Corporation Tax, previously in the not so distant past, companies were considered small if they made profits of up to £300k and large when they made profits in excess of £1.5m. This Chancellor does not appear as generous of those of the past.

‘Super-Deduction’

The Chancellor made reference to a ‘super-deduction’ of 130% in respect of capital investments by businesses, he eluded to this being quite a generous relief with his example of a business investing £10m and receiving a £13m deduction against its profits. We are yet to see detail of this new relief but expect it will replace the £1m Annual Investment Allowance.

The Chancellor announced that in response to the impact of the pandemic on business, he is introducing a temporary change to the rules surrounding the carry back of losses such that up to £2m of losses can be carried back for up to 3 years.

VAT

The VAT registration threshold remains at £85k up until 2024.

Small Business Mentoring

The Chancellor announced a new scheme to help UK plc grow post COVID-19 and post Brexit. The ‘Help to Grow’ scheme will offer management training and free digital technology advice and discounts on software to 30,000 small businesses with many UK universities being involved in the management training offerings.

To register go to https://helptogrow.campaign.gov.uk/

Alcohol and Fuel Duties

All duties frozen and all planned increases cancelled.

Free Ports

The eight regions selected to be freeports are East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.

These areas area designated to have different tax rates from the rest of the country similar to schemes run by other countries.

In summary, our thoughts are that this is a budget that not only protects the population over the coming few months as we come out of the pandemic but starts the rebuilding process. The one surprise is the omission of any further support for the NHS and key workers.

If you want to find out more about how The Budget 2021 will impact you and your business, from tax advice to financial management, please contact us.