The Chancellor unveiled a series of crucial extensions and additions to COVID-19 support measures to help businesses and individuals who have been affected by the pandemic. The Chancellor also outlined his plans to rebuild the economy and recoup public finances. Continue reading for a summary of the Chancellor’s key announcements outlined in the 2021 Spring Budget.
To view the full 2021 Spring Budget, please visit the government’s website.
Recovery Loan Scheme
The recovery loan scheme ensures businesses can access loans and other finance of up to £10m per company once the current coronavirus support loan schemes end. The government will guarantee 80% of the finance to lenders to ensure businesses who require financial support can access the help they need.
Non-essential retail businesses in England could be eligible for grants of up to £6,000 per premise, rising to £18,000 for leisure, gyms, accommodation and hospitality.
Eligible leisure, retail and hospitality businesses will continue to benefit from the 100% business rates relief until the 30th of June 2021. This will be reduced to 66% from July 2021 until the end of March 2022.
Furlough Scheme Extension
The Chancellor announced that the furlough scheme would be extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked, and the employer contributions will remain unchanged until June 2021. From July 2021, employers must contribute a further 10%, then 20% in August 2021 and September 2021.
Self-employment Income Support Scheme (SEISS) Extension
The government has also confirmed an extension to the SEISS with a fourth and fifth grant. The fourth grant will be worth 80% of three months’ average trading profits and will be paid in a single instalment capped at £7,500. This will cover the period from February 2021 to April 2021.
The fifth grant will be available for individuals whose turnover has fallen by 30% or more and will receive the full 80%, capped at £7,500, just like the fourth grant. Don’t worry – you can still access the grant if your turnover has fallen by less than 30%. However, you will receive 30% of the grant instead of 80%. The final grant covers the period from May 2021 to September 2021.
Rates & Allowances
The tax-free Personal Allowance in the UK will increase to £12,570 for the 2021/22 tax year. This means that the basic-rate band will rise to £37,700, while the higher-rate threshold will increase to £50,270, and the additional-rate will remain at £150,000. These will all remain unchanged until 2026.
National Living Wage
The National Living Wage, which is now applicable to over-23s, will increase by 2.2% to £8.91 an hour from April 2021.
National Insurance Contributions
The threshold for Class 1 primary contributions paid by employees and the class 4 National Insurance Contributions (NICs) paid by the self-employed will increase from £9,500 to £9,568 for the 2021/22 tax year. The upper earnings limit and upper profits limit will also increase from £50,000 to £50,270 from April 2021. The class 2 NICs rate for the self-employed will remain at £3.05 a week for the 2021/22 tax year, but the self-employed small profits threshold will rise to £6,515.
Currently, any unincorporated businesses, such as a sole trader or partner in a partnership, can claim to offset losses against their net income of the previous or current year or both. The Chancellor announced that for any trading losses made in the 2020/21 and 2021/22 tax years, you would be able to carry back for three years, with losses being carried back against later years first.
Company Car and Van Benefits
The company van benefit, which arises when a van is made available for an employee to use for private purposes, will increase to £3,500 from April 2021. The flat rate charge for the van fuel benefit will also increase from £666 to £669. At the same time, the company car fuel benefit multiplier will increase from £24,500 to £24,600.
The transferable marriage allowance will increase from £1,250 to £1,260 for the 2021/2022 tax year.
Perhaps one of the most prominent announcements in the 2021 Spring Budget was the Corporation Tax rates’ changes. From the 1st of April 2023, the Corporation Tax’s main rate will increase to 25% on profits but with some crucial protections. A small profits rate will be introduced for companies with profits of £50,000 or less, which will continue to be charged at 19%. The rate will then be tapered up, depending on business profits.
Corporation Tax Loss Relief
The Corporation Tax trading loss carry-back rule will be temporarily extended from the current one year to three years. The temporary extension will cover company accounting periods ending from the 1st of April 2020 to the 31st of March 2022. After the loss has been carried back to the preceding year, a maximum of £2m of unused losses will be available to carry back against profits of the same trade to the earlier two years. The cap applies separately for both the 2020/2021 and 2021/2022 tax years.
From the 1st of April 2021 to the 31st of March 2023, companies investing in new qualifying plant and machinery will benefit from a 130% first-year capital allowance. The new ‘super deduction’ will allow companies to cut their tax bill by up to 25p for every £1 invested.
Employers who hire a new apprentice between the 1st of April 2021 and the 30th of September 2021 will receive an increased £3,000 per apprentice.
Annual Investment Allowance
The Annual Investment Allowance will reduce to £200,000 from the 1st of January 2022, and transitional rules will apply where a business has an accounting period that spans the 1st of January 2022.
Tax sites in freeports
The Chancellor announced plans for creating new tax sites in freeports in Britain and will bring forward legislation to apply these to Northern Ireland at a later date. Businesses in the new tax sites will benefit from certain tax reliefs, such as an enhanced capital allowance of 100% for investing in plant and machinery and an enhanced 10% structures and buildings allowance rate for renovating or constructing non-residential buildings.
Extended 5% VAT discount
The current 5% discounted VAT rate for holiday providers, attractions, and the hospitality sector will be extended until the 30th of September 2021. A new 12.5% rate will then apply until the 31st of March 2022 to ease businesses back into the standard VAT rate.
Deferred VAT payments
As part of the government’s measures to support hard-hit businesses during the pandemic, companies could defer VAT payments due between the 20th of March 2020 and the 30th of June 2020. This was originally due to be paid on the 31st of March 2021. However, businesses can now spread the cost of their VAT payments over a maximum of 11 monthly payments.
Making Tax Digital
Making Tax Digital will apply to all VAT-registered businesses from the 1st of April 2022. From this point, all VAT-registered companies, regardless of whether they or below the threshold or not, will have to keep their records digitally and submit their return via MTD-compatible software.
Other key announcements
Stamp Duty Land Tax
As a result of COVID-19, the Chancellor previously announced a temporary increase to the nil-rate band for a residential property before Stamp Duty Land Tax was due. The nil-rate band will remain at £500,000 until the 30th of June 2021. It will then reduce to £250,000 from the 1st of July 2021 to the 30th of September 2021.
Mortgage Guarantee Scheme
A new mortgage guarantee scheme will be introduced from the 1st of April 2021. As part of the new scheme, the government will provide a guarantee to lenders across the UK who offer mortgages to buyers with a deposit of 5% on homes with a value of up to £600,000.
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