Another budget during the Covid epidemic and the Chancellor Rishi Sunak had 2 things in mind, helping struggling businesses and paying for it all in the future. So a Yin and Yang budget.
What is good, the Yang:
• Furlough extension until end September 2021 with employees receiving 80% of hours not worked with employers paying 10% of furloughed employees in July and 20% in August and September 2021.
• Self-employed grant SEIS (Self-Employment Income Support Scheme) will be available until end of September and is calculated at 80% of 3 months’ average trading profits. The 4th SEIS grant will be available from late April to 31st May 2021. If eligible HMRC should contact you in mid-April and need to apply online. This grant is now available if you only started doing self-assessments in 2019/20 .
• Stamp duty holiday for house purchases extended to 30th June 2021 for England and Northern Ireland with no charge on sales less than £500,000.
• No change on Income tax, National Insurance and VAT rates. It had been thought they may increase.
• VAT lower rate for hospitality and tourism to remain at 5% until September 2021 and then move to 12.5% until end March 2022.
• Grants of £6,000 per premises for non-essential outlets opening in April 2021 and £18,000 for gyms, personal care providers, hospitality and leisure.
• Business rates holiday until June 2021 with 75% discount after that • Firms taking on new apprentices will get £3,000 incentive. • A new 130% “super-deduction” granted for expenditure on plant and machinery over the next two years. This will not really impact small companies and we are not sure what will be allowed. It is only an extra 30% advantage if you are already claiming all expenditure in the capital allowance with impact only being 6p tax saving for every £1. Biggest impact will be for big business spending above their Annual Investment Allowance.
• Annual Investment Allowance (a 100% capital allowance deduction) for plant and machinery during is temporarily increased to £1m in 2021.
Not so good, the Yin
• Personal tax thresholds will be frozen from April 2021 to 2026. So there will be an increase in April 2021 as was planned but then no change until April 2026. So personal tax free allowance frozen at £12,570 and also the higher rate income tax threshold of £50,270 frozen from April 2021 to 2026.
• Corporation Tax rate of 19% will remain until 2023 but then
- rising to 25% in April 2023 on profits above £250,000 (10% of companies)
- profits up to £50,000 will remain at 19% after April 2023 (70% of companies)
- sliding scale of corporation tax for profits from £50,000 to £250,000
• Annual capital gains tax exemptions, pensions life time allowances and inheritance tax thresholds will be frozen at 2020-2021 levels until April 2026. Others
• Minimum wage to increase to £8.91 an hour from April 2021
• Contactless payment limit will rise to £100 later this year
• All alcohol duties to be frozen for second year running
• Fuel duty to be frozen for eleventh consecutive year
• Tobacco duties to rise by inflation plus 2%
There is support to ensure business gets back on its feet after the UK economy shrank 10% in 2020 and 700,000 people losing their jobs. The UK Government borrowing is the highest in peacetime and will be £355 billion this year. The increase in corporation tax is the first since 1974 to help pay for this but it should be noted that corporation tax had been lowered rapidly in the last few years and will still be lower than many countries.
We did a webinar on this and if you still want to know more about this comprehensive budget, you may watch the webinar here.