Friday, March 26th, 2021
Here at Copia Wealth & Tax, your Wolverhampton Accountants, we took the time to sit through Rishi Sunak’s Budget announcements and have summarised them below for the benefit of our clients and contacts.
You may have noticed that far more was disclosed, leaked, of this year’s Budget announcements than we have seen previously and so there were not too many surprises on the day.
Having analysed the details released thus far, there is definitely a lot to consider. Our Budget summary is split into four sections:
Please feel free to call if you need to discuss how these changes may affect your business or tax affairs in the coming months.
The Treasury is to continue the two existing major support schemes (CJRS and SEISS) in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption.
This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.
The judgement must be that there will be enough control over COVID-19 by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs.
In more detail:
There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim.
To counter this, the following changes to SEISS have been announced.
£5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will be available from 1 April 2021 and will consist of:
Eligible businesses will be ratepayers in England in the non-essential retail, hospitality, accommodation, leisure, personal care, and gym sectors.
This year, government will continue with the 100% business rates holiday through to the end of June 2021 for the retail, leisure, and hospitality sectors.
For the following nine months to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.
The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022.
The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.
The Recovery Loan Scheme will be launched to replace Bounce-back and CBILS loan schemes are designed to ensure businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.
Once received, the finance can be used for any legitimate business purpose, including growth and investment.
The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.
The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders.
The temporarily reduced rate of 5% for hospitality, holiday accommodation, and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector severely affected by COVID-19 lockdown restrictions.
This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.
Other measures outlined in the Budget include:
Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.
The government will underwrite 95% of the risk of mortgage default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.
The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021.
The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only.
A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland, is to be introduced from 1 April 2021.
Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. Unfortunately, this does provide welcome certainty for businesses. The changes announced include:
The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.
Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit.
Regional variations to Income Tax rates apply in Scotland and may apply in Wales.
NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.
The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.
From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.
The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.
The change will have effect on and after the Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.
The government will legislate in Finance Bill 2021 to 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.
Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements.
As expected, there will be increases in CT, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.
From 1 April 2023, there will be two rates of CT.
The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.
This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.
The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.
For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.
As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of COVID-19 continue to meet the working time requirements for EMI schemes.
The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement because of COVID-19. This measure will have effect until 5 April 2022.
A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.
The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred.
Assets that qualify for the special rate relief will qualify for the 50% first year allowance.
The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021.
In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances.
No changes in the present rates and allowances that are all frozen at current levels until April 2026. This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period.
There be no changes to the standard 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.
The recent increase in benefits of £20 per week is to be extended for a further six months.
Working Tax Credit claimants will receive equivalent support via a £500 one off payment.
There will be no increases in duty on alcoholic drinks or fuel.
Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).
Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.
The limits set for 2021-22 are:
The NLW will increase to £8.91 per hour from 1 April 2021.
There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.
Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost.
In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.
Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.
The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30 June 2020 and still have payments to make, or who are unable to pay in full by 31 March 2021. This includes those on Payment on Account and Annual Accounting schemes.
Apply now to spread these payments over a number of months – the later you join the fewer instalments are available to you. Join from 19 March 2021 to benefit from the maximum number of 11 instalments.
You can join the scheme online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV.UK and search ‘VAT deferral’.
The Budget was limited in coming forward with ways to pay back the cost of the COVID-19 crisis as we remain in national lock down and has focussed on providing ongoing support to business as the economy emerges from the crisis.
As ever, we are always here to help. If you need guidance on any of the support schemes please give one of our friendly experts here at Copia Wealth & Tax a call on 01902 783172 or alternatively just click HERE to contact us via our website and one of our business advisers will call you back to arrange a convenient time for a confidential no obligation chat.
We look forward to hearing from you, but in the meantime, please stay safe.