3rd March, 2021, Henry Pettitt
This was a highly anticipated Budget that focussed on short to medium term support and recovery in light of the current financial, and overall situation, the country is in due to the Coronavirus pandemic.
In the Budget 2021, the Chancellor confirmed a continuation of the current furlough scheme until the end of June with a further extension until the end of September. From July, the government will introduce an employer contribution towards the cost of unworked hours of 10% in July and 20% in August and September.
In addition to a fourth Self Employment Income Support Scheme (SEISS) grant, open for applications from late April, the Chancellor also announced a fifth SEISS grant to cover May to September this year. The value of the grant will be determined by a turnover test, businesses whose turnover has fallen by 30% or more will continue to receive the full grant, those whose turnover has fallen by less than 30% will receive a 30% grant.
A Busines Rates holiday for those in retail, hospitality and leisure industries will continue with 100% business rates relief from 1 April to 30 June, followed by 66% business rates relief for until 31 March 2022. Those in the tourism and hospitality sector will also continue to be eligible for the 5% reduced rate of VAT until 30 September, a 12% rate from September to March next year, with the full 20% VAT rate not coming into force for them until April 2022.
The Chancellor also announced a freeze on income tax Personal Allowance. The current rate is set at 20% when you earn £12,500 a year and the starting point for paying the 40% higher rate tax is £50,000. The thresholds will go up to £12,570 and £50,270 in April, as planned but will then be frozen for five years. With these thresholds maintained at the same level until April 2026, many people receiving a pay rise may find themselves in a new tax bracket.
One area that the Chancellor did announce a change to tax, albeit not until 2023, was on Corporation Tax. The rate will increase from to 25% on profits over £250,000, however the rate for small businesses with profits under £50,000 will remain at 19% and there will be a tapered system of relief for businesses with profits between £50,000 and £250,000, so that they pay less than the main rate.
The one big tax announcement was that of a new Super-deduction tax. From 1 April 2021 until 31 March 2023, companies investing in new plant and machinery assets, that qualify, will benefit from a 130% first-year capital allowance. This means that companies could cut their tax bill by up to 25p for every £1 they invest.
As predicted the Chancellor did not make this Budget about tax changes but about continued support for individuals and businesses in the wake of Coronavirus. However, with ‘tax day’ looming on 23 March, when the treasury will share documents and tax consultations to inform tax policy, we are likely to see more robust tax changes in the Autumn Budget later this year.
If you would like to discuss in more detail how these changes may affect you or your business please get in touch.
Profile: Henry Pettitt
Also see: Budget 2021 Guide