Budget 2021: What you need to know

1 year, 9 months ago by Oliver Atkinson

The annual budget for 2021/22 has finally been announced after weeks of speculation about what was to come for businesses and their employees in the wake of COVID-19. The Chancellor Rishi Sunak put forth his budget to Parliament detailing some interesting changes from 2020/21, along with a continuation of COVID-19 relief measures. We’ve summarised the key points here, but you can read the budget in full on the government website.

Personal Tax & Allowances

First, let us take a quick look at personal tax. It was announced that some personal tax rates and allowances will change from April 2021, but will be frozen at the following rates from April 2022 to April 2026:

• Personal Allowance – increased from £12,500 to £12,570
• Higher Rate Threshold - increased from £50,000 to £50,270
• Capital Gains Annual Exempt Amount – to remain at current level of £12,300
• Lifetime Allowance – to remain at current level of £1,073,100
• ISA and Junior ISA – to remain at current levels of £20,000 and £9,000, respectively
• Inheritance Tax thresholds to remain at current levels – nil rate band of £325,000, residence nil-rate band at £175,000 and residence nil-rate band taper to start at £2m

There were a few other minor announcements made - the National Insurance primary threshold will increase from £9,500 to £9,568 from April 2021 as expected, and the government will also continue to offer income tax exemptions for COVID-19 tests and working from home expenses.

Universal Credit will also see the increase of £20 per week extended for 6 months, which will be paid to claimants as a one-off deposit of £500.

Minimum Wage & Employment

From April 2021, there will be a further increase across all levels of the minimum wage over last year, and an adjustment to the age threshold for the National Living Wage which will be brought down from 25 to 23.

• 23 and over – from £8.72 to £8.91
• 21 to 22 – from £8.20 to £8.36
• 18 to 20 – from £6.45 to £6.56
• 16 to 17 – from £4.55 to £4.62
• Apprentices – from £4.15 to £ £4.30

The government will also extend the apprentice hiring incentive to September 2021 and increase the available amount to £3,000 per new hire. In regard to sick pay, for the time being the current level of two weeks of Statutory Sick Pay per employee will remain available to small and medium employers in the UK until the government sees fit to close this scheme, though they have not yet made an announcement as to when this will happen.

Corporation Tax

There has been some considerable speculation about whether or not the Chancellor would increase the rate of corporation tax to help claw back some of the deficit created by financing COVID-19 support measures. He announced in his speech today that Corporation Tax rate will be frozen until April 2023, upon which time it will rise from 19% to 25% for businesses with a profit of £250,000 or more. Alongside the rise however, there will also be a new small business profit rate that will remain at 19% for businesses with profits of £50k or less, with some tapering of the percentage up to the £250,000 threshold that is yet to be announced.

To perhaps offset the future rise in Corporation Tax, there will also be some new tax reliefs available for businesses starting from April 2021. The first of these is a change in the ability of businesses to carry back their losses, with both the timing and amount increasing considerably. Trading businesses will now be able to carry back their losses for accounting periods that fall within the last 36 months, tripled from the current 12. The amount of losses that businesses can carry back will be increased with this to a total of £2m.

In what is billed as a measure to help stimulate growth, the Chancellor also announced a new ‘super deduction’ to run until March 2023 that will allow businesses to reduce their corporation tax bill by up to 130% of an investment made. This means that investments made in plant and machinery assets will provide tax relief of not only 100% of the cost of the asset but add an additional 30% relief on top. Special-rate qualifying assets will also be able to benefit from a first-year allowance of 50%.

VAT

There were no immediate changes to VAT Rates for 2021-22, nor any planned changes announced for future tax years. The only big news regarding VAT this year was the continuation of the 5% VAT rate for the hospitality sector until the 30th of September 2021, and then a step increase for 6 months to 12.5% until the end of March 2022 to assist in recovery.

Business Rates

In positive news for businesses occupying rateable premises, the 100% rate relief available for properties with a rateable value of £51,000 or less will continue until the end of June 2021, at which point it will be then capped at 66% of the total payable amount until March 2022.

Other Taxes and Changes

There are other schemes that have also been confirmed for 2021/22, that include a freeze on fuel and alcohol duties to remain until April 2022 at the earliest, as well as an increase in the contactless spending limit from £45 to £100. A major announcement was made in regard to housing policy, that will see the current stamp duty holiday extended until 30th June 2021 for properties sold for a value of £500,000 or less, at which time the amount will be reduced to properties sold for a value of £250,000 or less, before finally returning to its pre-April 2020 level of £125,000 or less on October 1st 2021.

This will coincide with the reintroduction of government-backed 95% mortgages for properties with a value up to £600,000 that will be available from most of the major banks and lenders.

Finally, the government has announced eight new Freeports in England. These will be located at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. Businesses located in designated Freeports will have access to a wide range of reliefs, including an enhanced 10% rate for Structures and Buildings Allowance, an enhanced capital allowance rate of 100% for plant and machinery as well as special rate assets, full relief from SDLT and full business rates relief. Also under consultation is NIC relief for businesses in Freeports starting from April 2022.

COVID-19 Support

CJRS

Whilst the government is predicting that the vast majority of businesses in Britain will be able to open up by the summer, the Coronavirus Jobs Retention Scheme has been extended to the end of September to ensure that incomes are protected at a rate of 80% of wages payable if required. The scheme will continue unchanged until the end of June 2021, at which point employers will be asked to begin making a 10% contribution to their employee’s pay until the end of July 2021, rising to 20% until the end of September 2021.

SEISS

The SEISS scheme, much like the CJRS, has been extended but with some new caveats. The fourth SEISS payment will cover the period February to April 2021, and much like the previous grant will cover 80% of an average three-months of trading profits capped at £7,500. To claim this, the self-employed applicant must have filed a 2019-20

Self-Assessment Tax Return.

The fifth grant that will come in late July is slightly more complicated, however. Covering the period May to September 2021, the value of this grant will be determined by a turnover test. Applicants whose turnover has fallen by 30% or more will be eligible for a grant covering 80% of an average three-months trading profits. For those applicants for whom turnover has not dropped by 30% or more, a smaller grant of 30% of an average three-months trading profits will be available, capped at £2,850. We are yet to see what this test will entail and will be watching out for any updates as they come in.

Restart Grants

New business restart grants will be made available through local councils over the next few months, allowing non-essential businesses to claim up to £6,000 per rateable premises to assist them with reopening. For the hospitality and personal care sectors (gyms, hairdressers etc) whose opening will likely be delayed further, restart grants of up to £18,000 per premises will be made available to get them trading. Alongside this, approximately £425m of discretionary business grant funding will be given to local councils to distribute as they see fit in their own areas.

Business Loans

A new ‘Recovery Loan Scheme’ was announced by the Chancellor to replace the Coronavirus Business Interruption Loan Scheme, that will see trading businesses able to access 80% government-backed loans from a value of £25,001 up to £10m. These can come in the form of term loans or overdrafts, and invoice and asset finance will be available from anywhere between £1,000 and £10m per business. Further details on eligibility for these loans can be read here.

Skills & Training

Help to Grow is the government’s new training scheme that covers two areas – Management & Digital. The Management programme is a 12-week course to be delivered through business schools that will be available to SMEs and will be 90% funded by the government. The Digital programme aims to assist SMEs adopt new software and technologies - the government will provide up to £5,000 to cover half the costs of new software and will offer free advice through an online platform. Details for both of these programmes and registration forms can be found online.