Budget 2021: Glossary of Changes

On Wednesday, the Chancellor announced his Spring Budget for 2021. As ever, it was packed with changes to the financial landscape for UK individuals and businesses. Below are some high-level summaries of the key changes. Do get in touch for more detail and specific application to the circumstances you and your business face. Trust this is a useful summary!

Coronavirus Job Retention Scheme (Furlough)

This scheme was due to close on 30 April 2021. However, this has been extended until 30 June 2021 for full government support (80%) before tapering off in July (70%), August and September (both 60%). The scheme will then close on 30 September 2021.

Self-Employment Income Support Scheme

The government has so far offered 3 grants to self-employed individuals affected by the pandemic. This has now been extended to a 4th grant (open from April) and a 5th from July. The 5th grant is less generous for any business whose turnover has decreased less than 30%.

Apprentice Incentivisation

Any company who hires a new apprentice between 1 April and 30 September 2021 will be eligible for a grant from the government of ￡3,000 per apprentice hired.

Restart Grant

Any non-essential retailers can claim a grant of up to ￡6,000 from the UK government to aid with the costs of re-opening. For hospitality, leisure and personal care, this grant can be up to ￡18,000.

Recovery Loan Scheme

The government will continue to give 80% backing to any business that needs to take out a loan of between ￡25,000 and ￡10million. This scheme will then close on 31 December 2021.

Business Rates Holiday

100% relief on business rates is extended until 30 June 2021. Then, for the next 9 months until 31 March 2022, 66% relief is available. From 1 April 2022, normal rates resume.

VAT for Hospitality

The hospitality sector will still benefit from a 5% VAT rate until 30 September 2021. Then, for the 6 months until 31 March 2022, there is an interim rate of 12.5%. The rate then returns to 20% from 1 April 2022.

VAT Deferral New Payment Scheme 

Where a company used the original VAT deferral on VAT returns from 20 March to 30 June 2020, they can now pay the deferred VAT in up to eleven equal payments from March 2021, rather than one larger payment due by 31 March 2021, as originally announced.

Stamp Duty Land Tax Holiday

In order to avert the cliff edge on 31 March, the nil rate of stamp duty on the first ￡500,000 of a property purchase is extended until 30 June 2021. Then, for the 3 months to 30 September, the nil rate will apply to the first ￡250,000 before reverting to the first ￡125,000 from 1 October.

Government-backed Mortgages

In order to improve access to the property market, the government will back mortgages to allow buyers to purchase a house with only a 5% deposit, as long as the house has a value under ￡600,000.

Tax Thresholds

Capital Gains Tax and Inheritance Tax thresholds will be frozen at their current levels. Income Tax and National Insurance thresholds will increase slightly from 1 April 2021 and then will be frozen for 5 years. The only exception is the lower threshold for NI which may rise in future years.

Corporation Tax Rates

Tax on company profits stays fixed at 19% until 31 March 2023. At 1 April 2023, the main rate will jump to 25% for companies will profits over ￡250,000. Any companies with profits below ￡50,000 will still pay 19% on profits. For companies between the two levels, a marginal rate will be applied.

Corporation Tax Losses

Corporation Tax losses of up to ￡2million can now be carried back for up to 3 years to be used against former profits. This is applicable for any losses incurred in accounting periods ending between 1 April 2020 and 31 March 2022.

Corporation Tax ‘Super-Deduction’

In order to encourage companies to invest, any plant and machinery bought between 1 April 2021 and 31 March 2023 will be eligible to a super-deduction whereby the taxable profits of the company will be decreased by 130% of the value of the asset bought. For example, a ￡2,000 laptop would decrease taxable profit by ￡2,600 which leads to a tax saving of ￡494. This is an effective tax saving of 24.7% of the value of the asset.

Help to Grow (HTG) Schemes for SMEs

HTG Management - The government will provide a 90% funded training and mentoring programme. This 12 week programme would thus only cost ￡750 to the participant.

HTG Digital – Free advice will be provided to any SME seeking to improve their digital capacity. There will also be 50% vouchers for any software that:

i.             Builds customer relationships and increases sales

ii.            Makes the most of online selling

iii.           Manages the business’ accounts and finances digitally

R&D Tax Credits and EMI Scheme Review

Review consultations have been launched to see whether these schemes are as generous as they could be or whether they can be made more generous.

EMI Working Hours Exception

Eligibility for EMI requires employees to work a certain number of hours. However, last year, the government relaxed this requirement for any employees affected by furlough or whose working time was cut due to Covid-19. This measure has been extended until 31 March 2022.

Visa Reforms for Highly Skilled Individuals

In order to attract highly skilled individuals to the UK, there will be a new visa scheme from 1 April 2021 enabling start-ups and growing tech companies recruit from abroad. Those individuals who are highly qualified, particularly in STEM subjects, will be granted extra points enabling them to fast track their entry.