On Wednesday, the 3rd of March Chancellor Rishi Sunak presented the budget 2021-2022 in the House of Commons. As we all know, this year has been rather different due to the global pandemic and the damage that it has left on the UK economy.
In these unprecedented times, Chancellor noted that UK National borrowing is on its highest rate since 1945, and beside the regular budget schemes, additional reliefs are being introduced.
There is no increase in tax rates for 2021-22 however the Chancellor has indicated increases to come in future years. This was announced today to give certainty to the business community.
Corporation tax rates are to remain the same at 19% but they will be increased to 25% in April 2023. To protect their small business, any company that has taxable profits of £50,000 or less will remain at the lower rate and for profits of £50,000 to £250,000 there will be a tapered tax, meaning it will fluctuate accordingly.
There will be no increase in the VAT rate. Regarding the lower rate for the hospitality and tourism sector, the rate will remain at 5% until the 30th of September 2021 and then increase to 12.5% until April 2022 to aid recovery.
When it comes to business rates, relief has been extended to June 2021 and there will be a 2/3rds relief to April 2022 capped at £2,000,000 per premises.
Income Tax and National Insurance
There are no increases in the income tax rates or national insurance, however, the government has frozen any increases on personal tax allowances until 2026. The standard personal allowance rises to £12,570 for the 2021/22 Tax Year and will remain in place until 2026 (5 Years).
There is no increase in duties on alcohol or petrol.
As expected, the Furlough Scheme will be extended until September 2021. The government will continue to pay 80% of wages to all employees that lost their jobs due to pandemic related reasons, but from July employers will be asked to contribute, more precisely, with their share of 10% in July and 20% in August and September 2021.
Grant for the Self Employed
A fourth and fifth grant has been announced for the losses of self-employed. The fourth grant will cover losses from February to April 2021 and the fifth from May to September 2021. Self Employed whose turnover dropped over 30% will be entitled to 80% grant capped at £7,500 and those who dropped less than 30% get a 30% grant capped at £2,850. Additionally, those that were ineligible for the previous grants will be able to apply for the fourth and fifth tranche using their 19/20 tax return.
The scheme for zero stamp duty to be paid on amounts up to £500,000 has been extended to June 2021 where it will drop to a limit of £250,000 until September 2021. This has been done to give more breathing room for new homebuyers who were scrambling to complete the paperwork.
Universal Credit uplift
A six-month extension of the £20 per week Universal Credit uplift in Great Britain, with the Northern Ireland Executive receiving additional funding to match the increase. A one-off payment of £500 to eligible Working Tax Credit claimants across the UK.
The super deduction has been introduced as a tool to encourage investment in the UK economy during the post Covid period From April 2021 to April 2023.
That means that for every £1 invested in new equipment £1.30 can be used to reduce the tax bill. For example, a firm investing ten million can effectively reduce their tax bill by thirteen million. For example, if you spend £100,000 then £130,000 will be deducted against your profit.
This has been brought in to encourage investment and to soften the blow of the eventual corporation tax increase.
Losses carried forward
A company will be able to offset losses against their tax bill going back up to three years, allowing refunds of up to £760,000. Additionally, you can now offset the previous three financial years losses, as where the current rules allow for one year.
The government announced a Loan scheme that allows businesses of any size to apply for loans from £25,000 to £10m up until the end of the year. This replaces the coronavirus business interruption loan scheme and bounce back loan scheme. The government will provide lenders with an 80% guarantee to encourage lending.
From April 2021 a government backed scheme will allow first time home buyers to avail of a 95% mortgage. People who were not able to raise enough money for a 10% deposit, now can get their foot on the housing ladder. This is an attempt to convert the renting generation to the generation of homeowners.
The amount provided by the government for companies that hire apprentices will double from £1,500 to £3,000.
A new point based system will be introduced to allow unsponsored migration to the UK. Applicants will be assigned points based on their skills. In this way the UK can continue to attract the best and the brightest.
As expected, the restart grant has been confirmed. Non-essential businesses can apply for up to £6,000 and those hit harder in the hospitality, leisure and gym sector can apply for £18,000.
Help to Grow
Aimed at smaller businesses, Help to Grow scheme will help up to 130,000 small businesses by giving them the chance of MBA style training. Up to 90% of training will be government paid along with 50% off the cost of productivity enhancing software, up to the value of £5,000.
The first ever infrastructure bank will open in Leeds. It will have initial capitalisation of £12 billion. It’s remit will be to invest in green growth infrastructure to help deliver a zero carbon economy by 2050. The infrastructure bank is designed to replace the European investment bank.
Eight new English Freeport’s will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
Freeport’s are special trade zones that do not function under the same tax rules as the rest of a nation. British freeports will enjoy simplified customs procedures and tax breaks on goods passing through. It means a company can import products into a freeport without having to pay the UK tax rate on that item.
These are intended for capturing and storing carbon, creating clean energy such as wind turbines.
The budget can be overwhelming, there’s lots to take in right?! If you’d like some support, please do reach out. We’re here to help! You can chat with us directly via our website or get in touch here!