The Chancellor Rishi Sunak delivered the 2021 Budget this afternoon. His speech outlined his promise to continue to support of the economy, taxpayers and businesses during the remaining months of the pandemic. But the Chancellor also set out a long term recovery plan to “balance the books” after unprecedented support.
The Chancellor stated that “our plan is working,”, but also warned that recovery will “take a long time”.
Overnight our dedicated tax team at WHA will provide a detailed Budget summary outlining all of the changes that may affect you and your business. However, in the meantime we wanted to outline some of the headline changes announced earlier today.
Business / Taxpayer Support
- Confirmation of an extension of the furlough scheme until the end of September 2021. As part of these measures, employees will continue to receive 80% of their wages until the scheme ends, but businesses will be asked to contribute 10% in July and 20% in August and September as the scheme is gradually phased out.
- The self-employment income support scheme (SEISS) has also been extended. The fourth grant will cover February to April, worth 80% of average trading profits up to £7,500.
- The £20-a-week uplift in universal credit is extended for six months.
- A new £5 billion “Restart Grant Scheme” will be made available to provide additional funding to help the high street, providing up to £18,000 in Grants, bringing the total spent on business grants since the start of the pandemic to £25 billion.
- As the government-backed bounce back loan scheme and CBILS scheme comes to an end in March 2021, the Treasury is launching a new loan scheme to run until the end of the year. Loans can be between £25,000 and £10m.
- Hospitality and leisure businesses pay no business rates for three months, then rates will be discounted for the remaining nine months of the year by two-thirds, in a £6bn tax cut.
Personal Tax
- The government will not raise national insurance, income tax or VAT, but will freeze personal tax thresholds – as anticipated.
- The basic rate personal allowance rise will continue as planned to £12,570 from 6 April 2021 and will be frozen at this level until April 2026. The income tax higher rate threshold will rise to £50,270 from April 2021 and again this will be frozen until April 2026.
Business Tax
- In April 2023, the main rate of corporation tax will increase from 19% to 25%. However at the same time, the Government have created a small profits rate (for businesses with less than £50,000 profit), who will continue to pay corporation tax at the current 19% rate. A new tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full Corporation Tax Rate of 25%.
- Companies will also be able to carry back losses of up to £2m for three years. This measure will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020 to 2021 and 2021 to 2022 for unincorporated businesses.
- The government is investing £25bn by allowing a 130% super-deduction on tax for investments made by companies. The deduction would be administered through HMRC’s Capital Allowance arrangement. This means businesses can cut their taxes by up to 25p for every pound they invest.
VAT
- To continue supporting tourism and hospitality sectors and to protect 2.4 million jobs, the government has extended the temporary 5% reduced rate of VAT until 30 September 2021. Also to assist with a transition back to the standard rate of VAT, a 12.5% rate will apply until 31 March 2022
Housing
- The stamp duty holiday on properties (up to £500,000) continues until the end of June 2021. It will be kept at double its standard level until the end of September 2021, and then return to usual levels from 1 October 2021.
- The chancellor confirms a mortgage guarantee to help first-time buyers access 95% mortgage.
Air Passenger Duty (APD)
- APD rates will increase in line with RPI from April 2022, meaning that the reduced and standard short-haul rates will remain frozen at the same level since 2012, benefitting over 75% of passengers.11 Long-haul rates will increase in line with RPI. The rates for long-haul economy flights from Great Britain will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £5. Those travelling long-haul by private jets will see the rate increase by £13.
