Following yesterday's Budget, the SAS team has compiled this summary of the most significant announcements to help you see where this might impact your business and trading to plan for the coming months.
Coronavirus Financial Support Measure Updates
As expected, the government will extend furlough payments to 30th September 2021.
The Coronavirus Job Retention Scheme will run as it does now, financing up to 80% of employee salaries for work not completed due to businesses being closed or trading under restrictions.
Changes affecting employers are that:
- Employers must contribute 10% towards hours not worked from July 2021.
- From August and through to September, that contribution will increase to 20%.
In good news for self-employed traders, the Self-Employed Income Support Scheme will be extended in the fourth grant period, which applicants will be able to claim in April.
One of the biggest issues with this grant programme was that, until now, eligible applicants must have filed a tax return in the 2018-19 year to qualify, hence millions of self-employed people being excluded from financial support.
The self-employed can claim up to 80% of lost profits from April, calculated quarterly, provided they filed a 2019-20 tax return before 3rd March 2020. The grant is capped at £7,500 per quarter.
The fifth grant period will become claimable in July 2021, for the quarter to September 2021.
A new £5 billion grant scheme called Restart Grants has also been announced. This initiative will provide additional one-off payments of up to £18,000 for eligible businesses in hospitality and leisure. Non-essential retail companies can apply for a grant of up to £6,000.
Business Scheme Extensions and New Government Initiatives
There have been several announcements relating to business rates and taxes.
- The business rates holiday has been extended to June 2021 for retail, hospitality and leisure.
- Until March 2022, business rates will be discounted by up to two thirds, subject to caps.
- Exemptions for Income Tax and Class One NI for employer expenses related to home office equipment have been extended until April 2022.
- VAT reductions to 5% for visitor attractions and hospitality have been extended to September 2021.
- From October 2021, a new 12.5% VAT rate will apply until March 2022, at which point it will revert to 20%.
- The apprenticeship incentives have been extended to September 2021 with an increased payment claimable of £3,000.
- Employers can claim Income Tax exemption for employee reimbursements for Coronavirus antigen test costs retrospectively for 2020-21.
- Recovery Loans will launch next month and run until December 2021. Loans will be available between £25,000 and £10 million to support businesses in reopening. The government guarantee will cover 80% of the value of the loan.
- A new flexible apprenticeship scheme costing £7 million will launch to support apprentices working with several employers in the same industry.
- The government will announce new training programmes alongside work placements for 16-24-year-olds. This fund will pay for supported work placements and 40,000 more trainee positions.
Help to Grow introduces two new schemes for small and medium businesses. The Management scheme will provide SMEs with management training with up to a 90% government subsidy. The Digital scheme will provide free digital training and a 50% discount on software, at a value of up to £5,000.
Changes to Corporation Tax and Rules for Carrying Back Losses
Corporation tax is set to increase, but not until 2023. At that time, corporation tax rates will depend on the size of the business:
- Smaller companies with profits up to £50,000 will move to a Small Business Profits liability, staying at 19%.
- Larger businesses with a profit of over £250,000 will pay a new 25% corporation tax rate.
There will be a tapering relief system for profits between £50,000 and £250,000.
Another extension has been confirmed relaxing the rules for carrying back trading losses. Businesses, both incorporated and unincorporated, can carry back losses between one and three years.
This system will work as follows:
- Up to £2 million of trading losses in 2020-21 and 2021-22 can be carried back to the previous year for unincorporated business. The cap applies to each trading year, and the losses cannot have been used already as an offset.
- Organisations trading as a group should use the exemption across all trading arms, and therefore losses above £200,000 must be apportioned between companies.
We also heard about some new schemes and tax credit caps relevant to UK businesses:
- SME research and development tax credits will be capped at £20,000, plus three times the businesses NI and PAYE liability for periods from April 2021 onwards.
- New tax relief allowances will be available for qualifying investments in equipment and plant for expenses incurred between April 2021 and March 2023. This includes a 50% allowance in year one and a tax relief based on 130% of the expenditure cost. The Annual Investment Allowance will remain at £1 million until December 2021.
Property News in the 2021 Budget
Stamp Duty has been a much-speculated factor in this Budget. The current Stamp Duty holiday increases the threshold at which SDLT becomes payable to £500,000 and has been due to end on 31st March 2021.
Now, that higher limit will remain in place until June 2021. From July, the threshold will reduce to £250,000 and back to the former £125,000 limit in October 2021.
A new mortgage guarantee scheme allows homebuyers to invest in a property up to £600,000 with a governmental guarantee for up to 95%. The minimum deposit required is 5%.
As anticipated, a new surcharge for non-residents will launch in April 2021, applying an additional 2% levy for non-UK residents.
Announcements Relating to Income Tax, Savings and Pensions
In one of the major announcements, the basic rate threshold for UK income tax will be frozen until 2026.
That means that, as salaries rise, more people will find themselves liable for income tax or falling into a higher tax bracket.
- From 2021-22, the basic rate will apply to earnings from £37,700, a rise of £200 from 2020-21.
- This threshold will freeze until April 2026.
- Personal allowances will increase by £70 for 2021-22, at a level of £12,570.
- National Insurance limits will also remain static until 2026, with Upper Earnings limits of £50,270.
- Savings income liable for a 0% tax rate remains at £5,000 for the coming tax year.
- Lifetime allowances for pension investments are fixed at £1,073,100 until 2026.
- Capital Gains Tax remains mostly unchanged, without increases in tax rates as had been rumoured. The annual exemption will remain fixed at £12,300 until 2026 and at £6,150 for trustees.
- Inheritance tax allowances and rates are also fixed until April 2026. The threshold remains at £325,000 with a £175,000 resident nil-band rate.
- VAT remains at 20% on the standard rate. The registration limit is fixed at £85,000 and the de-registration limit at £83,000 until March 2024.
- ISA contribution limits remain at £20,000 for adults and £9,000 for children.
- National Living Wage increases to £8.91 an hour from April 2021.
The government has also announced two new changes relating to reducing emissions.
Cycle to Work will see flexibility for employees joining a scheme before 20th December 2020. Equipment provided does not have to be used primarily for travel to and from work. This remains in place until April 2022, at which time the condition will be reinstated.
Vans with zero carbon emissions will see a reduced benefit charge to zero from April 2021 onwards.
General Budget News Around Benefits and Brexit
One of the initiatives to try and ensure international trade remains viable post-Brexit is based on the announcement of Freeport locations.
There are eight identified locations, each of which will carry allowances and structures alongside tax incentives.
Immigration reforms have also been announced to make it easier for UK businesses to employ skilled foreign nationals. The points-based visa system will apply to skilled migrants.
Final general news includes:
- Universal Credit uplifts of £20 per week will be extended for up to six months.
- Working Tax Credit applicants will receive a one-off £500 support payment.
- There are no duty increases on alcohol or fuel.
- Contactless payment limits will increase to £100.
We hope that this summary helps identify some of the key information arising from yesterday's Budget, and we appreciate that it may be a lot of news to digest!
If you require any assistance working out where schemes, financial support and exemptions apply to your business, please contact the SAS Accounting team for further information.