The Chancellor delivered the much anticipated, and pre-briefed, budget 357 days after delivering his first budget as the Covid-19 pandemic started to bite – and to my eyes with a good few more grey hairs than last year!
The funding of Coronavirus measures are further extended, along with additional grants for the sectors most affected and an additional new loan scheme. It was good to see the Self Employed grant payments 4 & 5 extended to those newly self-employed in the tax year ending 5th April 2020 – these missed out on the first 3 grants.
With respect to Tax it’s mostly about the freezing of thresholds for a few years (no changes in income tax, National Insurance or VAT % rates), and an increase in the Corporation Tax rate up to 25% (from 19%) for those with profits above £50k from April 2023. The latter point may encourage some to revisit the salary vs dividends remuneration strategy ahead of the change – but we have plenty of time to consider.
Coronavirus – measures extended
- Furlough to extend to the end of September at 80% level for employees
- For July employers to fund 10%
- For August and September employers to fund 20%
- Self Employed Grants – 4 & 5
- Available to those who filed a first tax return for the tax year ending 5th April 2020 (by 2nd March) – these people missed out on grants 1-3.
- Grant 4 – covers the period Feb to April 2021 – 80% of trading profits up to £7,500 maximum. Claims open from April 2021.
- Grant 5 – covers the period May to July – Claims open from July 2021.
- 80% grant for those with more than 30% turnover reduction – max £7,500
- 30% grant for those with less than 30% turnover reduction
- Restart Grants – Non-essential Retail, Hospitality & Leisure
- Non-essential retail up to £6k
- Hospitality & Leisure – up to £18k
- Business Rates Holiday
- 100% holiday up to the end of June
- 2/3 discount for the remaining 9 months
- Reduced rate of VAT for Hospitality & Leisure to remain until April 2021
- To remain at 5% until 30th September
- Then 12.5% for a further 6 months
- Back to normal in April 2022.
Tax – Frozen allowances for the years ahead and increases in Corporation Tax from April 2023.
- Corporation Tax to increase to 25% from April 2023 for large companies
- If annual profits under £50k – no change (19%)
- For profits of £50-250k there will be a taper for the increase from 19% to 25%.
- Income Tax Thresholds – Minimal change
- 2021/2022 – Small change +£270 increase in the personal allowance and higher rate tax band to £12,760 & £50,270.
- Then frozen until 2026.
- VAT – no increase in VAT rates, and registration threshold to remain at £85k.
- CGT, IHT & Pension Limits – No changes to thresholds.
- Limited Companies – Corporation Tax Losses, can now carry back 3 years. This could mean that a loss incurred due to the pandemic can be carried back and a tax refund claimed – but we need to see the small print on this re the dates.
- Investment “Super Deduction” – can claim 130% offset to tax for investments in Capital Equipment. This for a £1,000 investment you can claim £1,300 as a tax cost. I think this will be through the existing AIA (Annual Investment Allowance) process – I expect it will be valid from April 2021 but need to see the detail.
- £3k funding for new Apprentice hires.
- New Recovery Loan Scheme – £25k + up to the end of 2021. Government to guarantee 80%.
- £8.91 National Minimum Wage (NMW) from April 2021
- Training & Digital – Funding for management training (90% of the cost) and Digital training (100%), and Digital software (50%). I expect we will see some detail behind this in due course.
- Stamp Duty Holiday – expended for another 3 months for property up to £500k until 30th June 2021, and then up to £250k until the end of September, before returning to £125k.
- Duties – fuel and alcohol. No changes.
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