Bitesize Budget Spring 2021

If you are still trying to make sense of the long-awaited Spring Budget that Chancellor Rishi Sunak issued last week then check out our summary below of the key points in clear terms.

Property – Stamp Duty Land Tax (SDLT)

Contrary to market expectations, the SDLT nil rate band of (￡0 - ￡500,00) will be extended to 30 Jun 21 (it was due to end on 31 March), after which it will reduce to ￡250,000 until 30 Sep 21, then back to ￡125,000 from 1 Oct 21 onwards. This (unexpected) extension has been welcome news to the residential property market.

Coronavirus Job Support Scheme (CJRS)

CJRS was due to end 30 Apr 21, but has now been extended for 5 months to 30 Sep 21. Employers will need to contribute 10% in July, increasing to 20% in August and September.

Here’s an example:

A reminder: employees must receive at least 80% of their usual wages (up to ￡2,500 per month) throughout the period they are on furlough.

Super Deduction (“Capital Allowances” in Tax Speak)

The new Super Deduction is only for companies. How so? Because the Corporation Tax rate will increase from currently 19% to 25% from 1 April 2023 onwards, so Rishi wants companies to invest heavily to help the economic recovery before the tax rise. The deduction is for 130% of costs in the 2 years from 1 April 2021. Qualifying expenditure is on new, plant and machinery. 

Corporation Tax Rate

From 1 April 2023 Corporation Tax will increase to 25%. Profits between ￡50,000 and ￡250,000 will be charged at the corporation tax tapered rate. Here’s how it will work (source: ICAEW):

Tax Losses – Companies

This applies to Corporation tax losses in accounting periods ending within 1 Apr 2020 to 31 Mar 2022. The losses can be carried back for up to 3 years, from currently 1 year. They will need to be offset against the later years first.

 After the unlimited carry back to the preceding year, a maximum of ￡2m of unused losses will be available for carry back against profits of the same trade to the earlier two years. A separate ￡2m cap applies for each period of 12 months.

 Tax Losses – Unincorporated businesses 

The new rules will apply to tax years 2020/2021 and 2021/2022. Similar to corporation tax losses, these can now be carried back up to 3 years, starting with the later years first.

 For individuals a separate ￡2 million cap will apply to the extended carry back of losses made in each of the tax years 2020/21 and 2021/22.

 Reduce 5% VAT for Hospitality

Since July 2020 there has been a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions, which was due to end on 31 March 2021. The government has now extended the reduced rate until 30 September 2021. To help manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.

Personal Tax – The Big Freeze

There are no changes to rates of income tax, capital gains tax (CGT) and inheritance tax (IHT). The personal allowance (increasing from ￡12,500 to ￡12,570) and higher rate threshold increases for 2021/22 (increasing from ￡50,00 to ￡50,270) will go ahead and are then being frozen to 2026. The CGT annual exempt amount, IHT nil rate bands, pension allowances will be frozen to 2026.

 Recovery Loan Scheme 

A new, government-backed debt finance programme is set to launch on 6 April 2021. The new scheme aims to help businesses affected by Covid-19 and can be used for any legitimate business purpose, including managing cashflow, investment and growth.

The maximum facility is ￡10m per business, starting at ￡1,000 for asset and invoice finance and ￡25,001 for terms loans and overdrafts.

The term length is a maximum of 6 years for term loans and asset finance facilities; up to 3 years for overdraft and invoice finance facilities.

Businesses who have taken out a BBLS, CBILS or CLBILS facility will be able to access the new scheme, although the maximum they are allowed to borrow will depend on their lender’s assessment. Interest and fees are to be paid by the business from the outset.

 Help to Grow – Management  

Rishi Sunak also announced a government sponsored training scheme for practical management training at leading business schools. The 12-week programme is 90% funded by the Government and has been designed to allow participants to complete it alongside full-time work. UK businesses from any sector that have been operating for more than 1 year, with between 5 to 249 employees are eligible.

Help to Grow – Digital   

This Autumn, small businesses will be able to get free impartial advice on how technology can boost their performance through a new online platform.

Eligible businesses will also be able to get a discount of up to 50% on the costs of approved software, worth up to ￡5,000.

Vouchers are initially expected to be available for software that helps businesses:

·        build customer relationships and increase sales

·        make the most of selling online

·        manage their accounts and finances digitally.

We trust you found this summary covering the key points for businesses helpful. If you’d like more details please click on the links to the Government’s website below:

Click here for a link to all the Government’s budget documents 

Click here for a more detailed Government summary

If you need advice and would like to discuss any of the points in this article please get in touch (call tel:0118 911 3777 or email [email protected])