Budget 2021

It is hard to believe that one year ago the Chancellor, Rishi Sunak, was giving his first budget and there was no mention of the word ‘furlough’. A matter of hours later the country was officially in the midst of a pandemic which rendered his budget obsolete (almost). The Chancellor delivered his second budget to the House today and below we have outlined the salient points as they affect our clients. 

Coronavirus Support 

• Furlough – It was leaked beforehand that the furlough scheme will be extended to 30 September 2021 and this was confirmed. Some notable changes though with Employers asked to contribute 10% in July and 20% in August and September.
• SEISS (Self-employed Income Support Scheme) – this is also extended and grants 4 and 5 grants will be made available to those who filed their tax returns by midnight on 2 March. Remember this is for those that do not operate via a limited company. 
• VAT – the VAT cut for hospitality firms to be maintained at 5% until September 2021. There will be an interim rate of 12.5% for the six months after before returning to the standard rate of VAT on 31 March 2022. The VAT threshold remains at £85,000 until 2024. 
• Business rates – the business rates holiday is extended to 30 June 2021 at the rate of 100% discount. The nine months thereafter the rate goes to 66%. 
• The loan support schemes offered by the government such as Bounce Back Loan and Coronavirus Business Interruption Loan Scheme are all closing on 31 March 2021. 
• £20 weekly uplift in Universal Credit worth £1,000 a year to be extended for another six months.
• Minimum wage to increase to £8.91 an hour from April 21

Housing

• Stamp duty holiday – this has been extended to 30 June 2021 with the first £500k of property value subject to 0% stamp duty (3% if buying property through a limited company or your second property). The threshold will then fall to £250k until 30 September 2021 and then returning to its usual level of £125k in October. 
• New homebuyers – the government will provide mortgage guarantees for new homebuyers who cannot afford large deposits with mortgages of up to 95% for home purchases up to £600k 

Income tax 

On income tax, the threshold for paying the basic rate will rise to £12,570 next year. For higher-rate payers, the threshold will be £50,270. Both rates will stay the same until 2026. This is effectively a ‘stealth’ tax meaning that it is not a tax rise but in effect is one because it will net an expected additional £6bn for the Treasury. 

Please note that the threshold for High Income Child Benefit charge remains at £50,000. 

Inheritance tax thresholds, pensions life time allowances and annual capital gains tax exemptions to be frozen at 2020-2021 levels until 2025-26.

Corporation tax

The rate of corporation tax is to rise from 19% to 25% from April 2023. Companies with profits of £50,000 or less will be taxed at 19%. The rate will be tapered for profits above £50,000 until they hit £250,000. 

Other business points

• Tax breaks for firms to “unlock” £20bn worth of business investment
• Firms will be able “deduct” investment costs from tax bills, reducing taxable profits by 130%
• Incentives for firms to take on apprentices to rise to £3,000 and £126m for traineeships
• £5bn in Restart grants for shops and other businesses in England forced to close
• £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses
• New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas
• Contactless payment limit will rise to £100 later this year

Other points made in the budget include the following;

• Wine and beer duties frozen 
• Petrol duties remain frozen
• A ‘green bond’ will be issued by the government to raise money for environmental projects. 
• New UK Infrastructure Bank to be set up in Leeds with £12bn in capital, with aim of funding £40bn worth of public and private projects
• £1bn fund to promote regeneration in a further 45 English towns, including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich