Budget 2021 – Wednesday 3 March

On 3rd March, the Chancellor Rishi Sunak unveiled the 2021 Budget and the measures that the Government will be implementing to aid the UK’s economic recovery as we continue to progress through the COVID-19 pandemic.

Here are the key points addressed in the Budget that will impact individuals and business-owners:

Furlough Scheme (CJRS)

The Chancellor confirmed that the furlough scheme will continue in its current form until the end of June 2021.

Currently employers are only required to cover the pension & National Insurance costs associated with their employees’ wages. From July onwards, employers will be asked to contribute towards the cost of unworked hours. This contribution will be 10% in July, and 20% in August and September.

There will be no change to employees, who will continue to receive the full 80% of wage for hours not worked.

The scheme is set to cease in its entirety on 30th September 2021.

Self-Employed Income Support Scheme (SEISS)

For the self-employed, the Chancellor announced that there will be a 4th and 5th SEISS grant made available for those who have been financially impacted by COVID.

The 4th grant made available will be worth 80% of three months average trading profits (up to £7.5k) as before, and covers the period February – April 2021. Applications for this grant can be made from late April.

The value of the 5th grant, which covers the period May – September 2021, will be determined by a turnover test as outlined below:

  • Individuals who have suffered a 30% + reduction in turnover will be eligible for the full grant worth 80% of three months’ average trading profits (up to £7,500.)
  • Individuals who have suffered a reduction in turnover that equates to less than 30% will be eligible for a grant worth 30% of three months’ average trading profits (up to £2,850.)

Crucially, anyone who lost out on the SEISS grants previously (due to not having filed a personal tax return for the 18-19 tax year) that submitted their 19-20 tax return by 28th February 2021, will now be eligible for the 4th and 5th grant.

Apprentice Incentive

The government has announced an increased financial incentive, payable to businesses that hire apprentices. For each hire aged 24 and under, the business will receive £2,000, and for each hire aged 25 + the business will receive £3,000.

This is in addition to the existing £1k the government provides for all new 16–18-year-old apprentices and those under 25 with an Education, Health and Care Plan.

Statutory Sick Pay (SSP)

Employers can continue to reclaim up to two weeks of SSP costs per employee where the absence is COVID related. While no deadline for the closure of this scheme has yet been announced, the Government is expected to release this information shortly.

Restart Grants

In addition to the grants already issued, the Chancellor has confirmed that further grants will be made available to businesses within the most financially impacted sectors.

Non-essential retail properties, which are set to re-open from 12th April – will be eligible to receive a grant of up to £6,000 per premises.

Hospitality properties and other sectors that are set to re-open at a later date, and will therefore be further impacted by the required closures, are eligible for grants of up to £18,000 per premises.

An additional £425mil of discretionary business grant funding will also be provided to local authorities for them to distribute as required.

Recovery Loans

From 6th April 2021, businesses of any size will be able to apply for a Recovery Loan of between £25k – £10mil until the end of the year.

These loans will be back by a Government guarantee of 80%, providing lenders with the confidence to finance UK businesses.

Businesses that have already received support under the existing guaranteed loan schemes (i.e. CBILS & Bounce Back Loans) will not be excluded from applying for a recovery loan, and are welcome to apply as required.

Business Rates Holiday

Eligible businesses in retail, hospitality and leisure properties will continue to receive 100% business rates relief until June.

From 1st July, the business rates relief available to eligible businesses will reduce to two thirds (66%) – however, this relief will remain in place until March 2022.

The business rates relief will be capped at £2mil per business for properties that were required to close on 5th January 2021, or £105k for other eligible properties.

Reduced VAT rate

For hospitality and tourism sectors, the reduced VAT rate of 5% has been extended until 30th September 2021.

Rather than an immediate return to the standard rate in October, the Chancellor has announced that there will be an interim rate of 12.5% applicable until March 2022.

Stamp Duty Holiday & Mortgage Guarantee

The Stamp Duty holiday will remain in place for properties up to £500k until 30th June 2021. It will then be reduced to £250k until 30th September 2021, with the usual threshold of £125k applying again from 1st October 2021.

The Chancellor announced a further new initiative, whereby home-buyers who can only afford a 5% deposit may be eligible for a Government guarantee on mortgages up to £600k from next month. It was indicated in the announcement today that this scheme will be offered by several high-street lenders.

Personal Tax

It has been confirmed that there will be no increase to Income Tax, National Insurance or VAT rates in the 2021-22 tax year.

However, there will be a freeze on personal tax thresholds as outlined below.

  • The Personal Tax-Free Allowance will increase to £12,570 in April 2021 and remain at that level until April 2026.
  • The Higher-Rate Tax Threshold will increase to £50,270 in April 2021and remain at that level until April 2026.

The Chancellor also confirmed that there will be no change to the Inheritance Tax threshold, the Lifetime Pension Allowance, the Capital Gains Tax Annual Exempt Amount, or the VAT registration threshold.

Duties

Planned increase in duties for alcohol and fuel have been cancelled.

Corporation Tax

Beginning in April 2023, the UK rate for Corporation Tax will increase to 25% (currently 19%.)

However. smaller businesses with profits of under £50k will continue to pay Corporation Tax at the current rate of 19%.

For companies with profits exceeding £50k there will be a taper, – only companies with profits of over £250k will pay Corporation Tax at the increased rate of 25%.

The Chancellor advised that there will also be an extension to the existing loss carry-back rules, meaning that companies will now be able to carry back losses of up to £2mil for 3 years.

Super-Deduction

From 1st April 2021, companies that invest in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance – this will reduce a company’s tax bill by up to 25p for every £1 they invest.

There will also be a 50% first year allowance for qualifying special rate assets.

The super-deduction is a temporary measure that will be in place for two years, until 31st March 2023 and is designed to encourage companies with retained earnings to invest in productivity-enhancing assets now.

Research & Development Tax Credit

From 1st April 2021, there will be a restriction to the amount of the R&D tax credit that a company can receive in any one year. The cap is set at £20,000 plus three times the company’s total PAYE and NIC liability for the period.

This restriction has been implemented by the Government to reduce the amount of companies abusing the repayable tax credit.

Additionally, the government is currently conducting a review of R&D tax reliefs, and amongst other things, will consider bringing data and cloud computing costs into the scope of relief.

If you would like to find out more about the measures outlined in the 2021 Budget, please get in touch.