The 2021 Budget was announced on Wednesday 3 March.
The Chancellor is very aware of the difficult position we are still in, so has held back from significant change and increases to tax rates to pay back the support and grants provided.
He has provided further support under CJRS and SEISS and has held allowances and rates until April 2026, not providing the usual annual increases.
The key points from the 2021 budget are as follows:
Coronavirus Support
Job Retention Scheme
The scheme has been extended to September 2021. Employees will continue to receive 80% of their furloughed pay but employers will be required to meet 10% of these costs for July and 20% for August and September.
From 1 May 2021 the scheme is eligible to new employees – employed on 2 March 2021 and had an earnings period reported on RTI between 20 March 2020 and 2 March 2021.
So, employers continue to pay all employers’ NIC and auto enrolled pension contributions and will contribute towards salary in July, August and September.
Self-Employment Income Support Scheme
There will be two further grants (4th and 5th) under this scheme and they will take into account 2019-20 tax returns.
The grant is now based on the average of trading profits for the four years 2016-17 to 2019-20. You must have submitted your 2019-20 tax return by 2 March 2021 to be eligible and you may be eligible for these claims even if you weren’t eligible for grants 1, 2 or 3.
The 4th grant will be calculated at 80% of 3 months average trading profits for the four tax years 2016-17 to 2019-20, capped at £7,500. The grant will cover the period Feb to April 2021 and available to claim in April 2021. As before, trading profits must be no more than £50,000 and must be more than 50% of total income. In addition to be eligible you must have experienced a significant financial impact from coronavirus from February 2021 to April 2021.
As the calculation now includes the 2019-20 year, you may receive a grant that is higher or lower than previous grants.
The 5th and final grant will cover the period May to September 2021, and is similar to the 4th grant. It will be determined by how much turnover has been reduced – if there is a reduction of 30% or more in turnover for the period then the grant would be 80% as above, if it is less than 30% it will be 30%.
As before all SEISS grants are taxable.
SSP rebate scheme
This scheme allows smaller employers to reclaim up to 2 weeks SSP per employee for coronavirus related absences and will continue for the time being.
Income tax thresholds
Personal allowance will be increased to £12,570 and higher rate tax threshold will be increased to £37,700. They will be kept at this level until April 2026. All other income rates and allowances remain the same as 2020-21.
Inheritance Tax
The IHT nil rate band remains at £325,000. The nil rate band for main residence left to a direct descendant remains at £175,000 and will stay at that level until April 2026.
Capital Gains Tax
The annual exempt amount remains at £12,300 and will be so until April 2026.
Pension life-time allowance
The cap on tax relieved pension savings will stay at its current level of £1,073,100 until April 2026.
Capital Allowances
To encourage Companies to invest in plant and machinery for expenditure between 1 April 2021 and 31 March 2023 a first year allowance will be available of 130% for expenditure on plant and machinery that qualifies for the main rate of 18% writing down allowance and 50% first year allowance for plant and machinery that qualifies special rate of writing down allowance of 6%.
This is independent of Annual Investment Allowance which can be claimed instead, if it is more beneficial.
Carry back period for losses
Un-incorporated businesses and Companies can benefit from the temporary extension in the period in which losses can be carried back.
This is increased from one to three years.
Corporation tax
From 1 April 2023 companies with taxable profits of £250,000 or more will pay corporation tax at 25%.
A small companies rate will apply to companies with profits of £50,000 or less of 19%.
Companies with profits between £50,000 and £250,000 from 1 April 2023 will pay corporation tax at 25% but benefit from marginal relief.
The limits (£50,000 and £250,000) will be reduced to take into account the number of associates and for accounting periods of less than 12 months.
Tax exemption for COVID-19 antigen tests
An income tax exemption is to be introduced for 2021-22 and retrospectively for 2020-21, where an employer reimburses an employee for the cost of a coronavirus antigen test.
Temporary SDLT threshold extended
The temporary increase in Stamp Duty Land Tax for residential property to £500,000 is now extended to 30 June 2021, from 31 March 2021.
From 1 July 2021 it will be reduced to £250,000, returning to its former level of £125,000 from 1 October 2021.
VAT registration threshold
This stays at £85,000 for 2021-22 and also for 2022-23 and 2023-24.
Temporary 5% VAT rate for hospitality and leisure
This is to remain in place until 30 September 2021 and from 1 October 2021 will be 12.5% reverting back to 20% from 1 October 2022.