Quick round-up of the Budget 2021

If we can help and advise you in any way, please get in touch with your usual RRL contact (direct dial numbers can be found here).

Tax

  • No expected significant capital gains tax or inheritance tax changes. There was also no restriction announced to tax relief on pension contributions. Whilst this is the case, the expectation of change in the short term is still very prevalent.
  • Probably the story of the Budget was the announced corporation tax rate increase from 19% to 25% from 1 April 2023 – this will not impact on micro businesses (excluding investment companies that are not letting companies), and there will be a form of blended rate/taper for companies with taxable profits up to £250k. The £250k upper limit and £50k lower limit will be reduced/divided accordingly to take into account associated companies, as we are used to with other similar corporation tax limits.
  • A ‘super-deduction’ relating to capital allowances was announced– this being in the form of an enhanced temporary 130% first-year allowance for main rate assets, and a 50% first-year allowance for special rate assets.
    • This will apply from 1 April 2021 – 31 March 2023 (will exclude expenditure incurred on contracts entered into prior to Budget day on 3 March 2021).
    • There will be exclusions for used and second-hand assets, and plant and machinery expenditure which is incurred under a Hire Purchase (or similar contract) will need to meet additional conditions to qualify for the ‘super-deduction’ and special rate relief.
    • This will almost certainly need to be taken into account for those companies planning capital expenditure in the coming months and years.
  • A temporary extension of the ability to carry-back trading losses from 1 year to 3 years for corporation tax and income tax purposes was announced – this extension will apply to trading losses made by companies in accounting periods ending between 1 April 2020 and 31 March 2022 and to trading losses made by unincorporated businesses in the 2020/21 and 2021/22 tax years. This will clearly be of value in the right circumstances.
  • The income tax personal allowance will be frozen at £12,570 from April 2022 – April 2026, and the income tax higher-rate threshold will be frozen at £50,270 from April 2022 – April 2026. Almost inevitable!
  • The VAT thresholds (registration £85,000, deregistration £83,000) are to be frozen until 31 March 2024.
  • The capital gains annual exemption is to be frozen at current levels until 6 April 2026 – this is somewhat of a relief given the Office for Tax Simplification’s recommendation to dramatically reduce the exemption.
  • Making Tax Digital (MTD) for VAT extended so that VAT registered businesses with turnovers below the VAT threshold will be required to operate MTD for VAT from 1 April 2022.
  • MTD for income tax has been confirmed as commencing from 6 April 2023
  • The Pensions lifetime allowance is to be frozen at £1,073,100 until 6 April 2026
  • The Stamp Duty Land Tax (SDLT) residential property, temporary £500k nil-rate band has been extended until 30 June 2021, then will reduce to a £250k nil-rate band from 1 July 2021 – 30 September 2021.
    • This increases the window for some planning regarding residential property structuring.
  • The temporary VAT cut to 5% for hospitality, accommodation and attractions across the UK has been extended until 30 September 2021, which will be followed by an increase to a 12.5% rate for a further six months until 31 March 2022.
  • The inheritance tax standard nil-rate band and residence nil-rate bands will be frozen at their current levels until 6 April 2026.
  • Late payment penalties for income tax are to be tightened – penalties will now apply from 16 days of an overdue payment, and another penalty if still unpaid at 30 days (this unless a ‘time to pay’ arrangement has been entered into).
  • A new points based penalty regime for late submission has been confirmed for income tax and VAT to apply from 6 April 2023 (6 April 2024 for those without business or property income over £10k per year) and 1 April 2022 respectively.
  • Off-payroll working rules (IR35) were confirmed as coming in from 6 April 2021
  • Fuel duty will be frozen again – but can it really be frozen if it has never actually come in?!
  • The adult ISA annual subscription limit for 2021/22 will remain unchanged at £20,000.
  • A review of Research & Development tax relief has been launched
  • The Social Investment Tax Relief is to be extended to April 2023 – was set to end in April 2021 (albeit it has been used so little that we’re unsure if anybody would have noticed!)

 Covid-19 Business Support

  • The Coronavirus Job Retention Scheme (CJRS) has been extended to 30 September 2021 – but with restrictions!
    • Until 30 June 2021, the government furlough grant will continue to pay 80% of wages for hours not worked, capped at £2,500 per month. Employers will be liable for employer National Insurance contributions and employer pension contributions only.
    • Progressively, with effect from 1 July 2021 until the cessation of the CJRS on 30 September 2021 the following changes will be made:
      • From 1 July 2021: employers must contribute 10% towards the pay of furloughed employees, with the government grant reduced to 70%.
      • From 1 August 2021: employers must contribute 20% towards the pay of furloughed employees, with the government grant reduced to 60%.
  • The Self-employed Income Support scheme (SEISS) has been extended to 30 September 2021 with the pre-announced 4th grant (covering February 2021 – April 2021), and a newly announced 5th grant (covering May 2021 – September 2021).
    • The 4th grant will be set at 80% of 3 months’ average trading profits, paid out in a single lump sum, capped at £7,500.
    • The 4th grant will take into account 2019/20 tax returns and will be open to those who became self-employed in the 2019/20 tax year.
    • The online claims service for the fourth grant will be available from late April 2021 until 31 May 2021.
    • The 5th grant will be worth:
      • 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more; and
      • 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%.
    • You will be able to claim from late July if you are eligible for the 5th grant.
  • A ‘Restart Grant scheme’ has been announced’ – these grants will be made up of a one-off cash grant of up to £18,000 (depending upon relevant property rateable value) for hospitality, accommodation, leisure, personal care and gym businesses in England, and up to £6,000 (depending upon relevant property rateable value) for non-essential retail businesses
    • The Restart Grant scheme will replace the monthly Local Restrictions Support Grant (Closed) and Local Restrictions Support Grant (Open), which will both close at the end of March 2021.
    • The scheme will be administered by local authorities as per the previous iterations.
  • New government backed mortgage guarantee scheme will enable all UK homebuyers secure a mortgage up to £600,000 with a 5% deposit.
    • We understand that the scheme will not be restricted to first-time buyers, nor be restricted to new build properties only, and that they will be available from April 2021.
    • In his budget speech, the Chancellor said that “several of the country’s largest lenders including Lloyds, Natwest, Santander, Barclays and HSBC will be offering these 95% mortgages”
  • A new UK-wide Recovery Loan Scheme has been announced. This is designed to provide access to loans once the coronavirus business support loans (CBILS and Bounce-back Loan schemes) close.
    • The scheme launches on 6 April 2021 and is open until 31 December 2021.
    • Loans will be available through a network of accredited lenders, whose names will be made public in due course.
    • Under the scheme, the government guarantees 80% of the finance to the lender.
    • Term loans and overdrafts will be available between £25,001 and £10 million per business.
    • Invoice finance and asset finance will be available between £1,000 and £10 million per business.
    • Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.
    • No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
    • See here for further detail.
  • An extension of the apprenticeship hiring incentive in England to September 2021, and an increase of payment to £3,000 has been announced.
  • The business rates holiday has been extended (originally set to end this month) by an additional 3 months for non-essential retail, hospitality and leisure businesses.
    • Rates will then be discounted for the remaining nine months of the year by 2/3rds up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open during lockdowns.
  • £90 million funding to support our government-sponsored national museums in England due to the financial impact of Covid-19.
  • Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the government.
  • Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost – more information can be found here.
    • There are 2 schemes – the Digital scheme and the Management scheme.