Budget 2021 highlights

On 3th March 2020 the Chancellor Rishi Sunak delivered budget 2021. The Office for National Statistics said gross domestic product (GDP) fell by 9.9% in 2020, as no sector of the economy was left unscathed by lockdowns and plummeting demand during the pandemic. It was the biggest fall in annual GDP in modern times so there is a lot of pressure to stimulate the economy for the years ahead.

In this article we outline some of the most important uptakes in the budget announcement.

Furlough scheme extended to the end of September 2021

In advance of the budget, the Chancellor announced the extension of the furlough scheme (Coronavirus Job Retention Scheme or ‘CJRS’) until the end of September 2021. Workers will continue to receive 80% of their current salary for hours they don’t work because they’ve been furloughed.

The support will be provided by a grant to the employers. Employers will need to make a contribution of 10% of the worker’s salary for unworked hours in July, and a 20% contribution in August and September. The £2,500 monthly limit for the grant remains in place.

There was no announcement of any further support for small limited company directors who take most of their income through dividends and can only claim a small amount on the CJRS scheme.

New measures to help the newly self-employed through the Self-Employed Income Support Scheme (SEISS) and existing scheme extended to a fifth grant

The scope of the SEISS grant has been extended. The fourth grant under the scheme will now be available to individuals who began self-employment in the 2019/20 tax year, as well as those who have previously claimed.

Individuals who are eligible will be able to claim the fourth round of SEISS at 80% of average trading profits capped at £7,500 for three months. The fourth grant will be available in April. There will be a fifth grant to cover May, June, and July, likely to be available over the summer. If your turnover has fallen by 30% or more, you’ll receive the full 80% grant. If turnover has fallen by less than 30%, the grant is reduced to 30%.

To be eligible for the fourth grant, and for new entrants to the scheme, you must have filed a Self Assessment tax return for the 2019/20 tax year by midnight on 2nd March 2021. All other eligibility criteria will remain the same as the third grant.

Recovery Loan Scheme

From 6th April 2021, the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes. We’ll give further details on the new scheme once they’re available.

The previous loan schemes Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme will close as planned on 31st March 2021.

New Restart Grants to help businesses reopen in England

New ‘Restart Grants’ to help businesses in England reopen when lockdown begins to ease from April 2021 were announced:

  • Non-essential retail businesses will receive grants up to £6,000 per premises.
  • Hospitality and leisure, including personal care and gyms, which are more impacted by restrictions and may not open until later in the year, can each receive grants of up to £18,000.

Business taxes and allowances

Corporation Tax to increase for larger companies

The Corporation Tax rate will remain at 19% for business profits up to £50,000, but will have a tapered increase to a main rate of 25% for profits over £250,000 from April 2023.

VAT

The VAT cut to 5% will remain in place until the end of September for the hospitality and tourism industries. It will then rise to 12.5% for another six months before returning to the full 20% rate in April 2022. There are no changes to the current VAT.

Business investment tax relief and loss relief for businesses

A new “super-deduction” tax relief was announced for businesses to reduce their tax bill by 130% of what they spend on investment. The Chancellor also announced the extension of the normal loss carry-back rules from one year to three years for losses of up to £2 million. This will enable tax repayments to be claimed, providing relief and cash flow support for businesses.

Business rates reliefs

Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1st April 2021 to 30th June 2021.

This will be followed by 66% business rates relief for the period from 1st July 2021 to 31st March 2022, capped at £2 million per business for properties that were required to be closed on 5th January 2021, or £105,000 per business for other eligible properties.

Nurseries will also qualify for relief in the same way as other eligible properties.

Apprenticeships

The apprentice hiring incentive in England was extended to September 2021 and the payment increased to £3,000. A flexi-apprenticeship scheme was also announced that will allow apprentices to work with multiple employers in a sector.

Statutory Sick Pay

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 Programme

The Chancellor announced a new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost. The programme aims to help small and medium-sized businesses across the UK learn new skills, reach new customers and boost profits. Further information is on the Gov.uk website, where you can also register your interest.

Personal Tax, Allowances and Savings

Income Tax Rates and Thresholds

The basic personal tax-free allowance will increase to £12,570 from April 2021. It will then stay at that level until 2026. The Higher Rate threshold will increase to £50,270 and will remain the same until 2026.

In the 2021/22 tax year the new National Insurance thresholds are:

  • Primary Threshold for employee’s Class 1 National Insurance increases to £9,568
  • Upper Earnings Limit (UEL)/Upper Profits Limit increases to £50,270
  • Small profits threshold for Class 2 National Insurance for self-employed increases to £6,515
  • The Lower Profits limit for starting to pay Class 4 National Insurance for the self -employed increases to £9,568 and the Upper profits limit for Class 4 National Insurance increases to £50,270.

There are no changes to the current rates of Income Tax or National Insurance.

National Minimum Wage

The government confirmed that the National Minimum Wage would rise to £8.91 per hour.

Inheritance Tax

The threshold for paying Inheritance Tax has not changed at £325,000 and it will remain the same up to 2026.

Pensions Lifetime Allowance

The pension’s lifetime allowance remains at £1,073,100 and will be maintained at that level up to 2026.

Capital Gains Tax

The Capital Gains Tax annual exempt amount remains at £12,300 and will remain at that level up to 2026.

Personal Savings

The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2021-22.

The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.

The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.

Universal Credit and Working Tax Credit

The government announced that the temporary additional £20 Universal Credit uplift will be extended by a further six months. He also announced a £500 one-off payment for eligible Working Tax Credit claimants.

IR35 – planned changes for the private sector will come into force on 6th April 2021

As expected, there was no further news concerning the implementation of the IR35 changes in the private sector. The Chancellor resisted industry pleas for further delaying the introduction. The new rules will now apply from 6th April 2021. We have a detailed article on the rules concerning IR35.

Other Taxes

Alcohol and Fuel Tax

Duty on alcohol and fuel will be be frozen for the next 12 months and planned increases are cancelled.

Housing

Stamp Duty Land Tax

The Chancellor announced that the stamp duty holiday for the first £500,000 Nil Rate Band of the purchase price will continue until the end of June. From 1st July 2021, the Nil Rate Band will reduce to £250,000 until 30th September 2021 before returning to £125,000 on 1st October 2021.

Mortgage Guarantee Scheme

A new mortgage guarantee scheme will be introduced in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. Under the scheme, all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to.

The scheme will be available for new mortgages up to 31st December 2022. It will increase the availability of mortgages on new or existing properties for those with small deposits.

We will continue updates to this article and our related articles with further changes as more details are released. Follow us to keep up to date with all the latest news and information that affects business owners in the UK.