The main aspects of the Budget 2021
The long awaited budget is finally out and the chancellor really knuckled down on it really hard in his desire to recoup all the government expenditure incurred through the pandemic support. He didn’t shy away from it and indeed was very clear in his statement that it was the only out in getting the economy to recover. What did we learn then from the budget?
- The big Hit! The corporation tax increase will be implemented come 2023. This will be increased to 25% from 2023 and it was a very big surprise to most. Will it push away some businesses to lower tax countries? Possibly. However small businesses may survive the tax hike after all which is a huge relief as they will stay on the lower tax rate of 19% for sometime at least. Their profits MUST be less than £50,000.
- The breadwinner hit! Yes the country is full of people heading to work daily to put food on the table. These people have benefitted from the yearly increase in the personal tax allowance threshold over the last few years. Unfortunately, it won’t be the same from next year until April 2026. So the personal tax allowance will stay at £12,570 the 2021/22 threshold until 2026. The basic rate limit will be £37,700 and the higher rate threshold at £50,270 until 2026.
- As previously stated in one of my recent blog articles, the SEISS for self employed has been extended until September 2021 with access to the grant widened to include those who submitted their 2019/20 tax returns. Read more here MORE HELP FOR SELF EMPLOYED THROUGH SEISS
- The furlough scheme has been extended as well until the end of Sept 2021. The government will continue to pay 80% of employees wages for hours they cannot work. From July onwards, the employers will have to contribute accordingly; 10% in July and 20% in August and Sept 2021 towards the of employees wages.
- Businesses will be able to benefit from the tax treatment of losses of up to £2M which can be carried back for 3 years.
- The 5% reduced rate VAT rate introduced mainly for the hospitality sectors; restaurants, hotels and other leisure centres is to be extended until September 2021. Following that, a rate of 12.5% will apply from 1st Oct to March 2022. Businesses will be able to benefit from this rate reduction as the economy opens up again.
- The Capital allowance changes mean that companies can now reduce their tax bill by 130% of the cost of the new plant and machinery and 50% of the cost of the special rate assets in a new super deduction. Seek tax advice if you are unsure how you can benefit from this.
- The government has doubled the incentives for hiring new apprentices to £3,000 with the government injecting another £126M to increase the number of traineeships.
- The government will issue an extra £5bn in restart grants which will be made available for shops and other businesses that were forced as a result of the recent lockdown. The premises for non-essential outlets will benefit from a £6000 grant as they re-open in April 2021 whilst other businesses that were forced to close like gyms, personal care providers and other hospitality and leisure businesses will benefit from an £18,000 grant. It is hard to determine how beneficial these grants will be given the debt situation that most businesses have found themselves as a result of this pandemic. Will they really kickstart the businesses or simply help pay off some of these debts? That’s the question.
- Thankfully businesses can also benefit from the 100% business rates holiday which has been extended until June 2021, a huge cost saving for most. After June the relevant authorities will reduce the charge by 2/3rds for the following nine months.
- With the CBIL’s and the BBL’s expiring at the end of March 2021, the government is introducing the business recovery loan scheme that can be accessed by any business in the UK. Additional criteria is yet to be clarified but credit checks may be carried out. However, businesses can access loans from £25,000 to £10M with no personal loan guarantees for loans up to £250,ooo. Similar to the previous schemes, the government is offering 80% guarantee. More information on this is available here; Recovery loan Scheme.
- The help to grow scheme to help businesses increase productivity was also announced that will provide access to training on courses on management and going digital. More information is available here; HELP TO GROW SCHEME.
Other budget items worth mentioning include the stamp duty holiday on house purchases in England and Northern Ireland which has been extended until June 2021. The government is also introducing a new mortgage guarantee scheme to help first time buyers to access 95% mortgages on properties up to the market value of £600,000.
Ultimately the government appears to be doing everything necessary to help businesses and individuals get through this pandemic. However, it is also known that a lot of people have fallen through the hole with no support whatsoever. It’s tough one but the budget is set.