Following the 3 March 2021 budget, we have summarised the main changes that have taken place. Please get in touch if you would like to know any further details or how these changes may impact you.
COVID-19 related
Coronavirus Job Retention Scheme (CJRS): The furlough scheme (CJRS) is extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked. No employer contributions are required (apart from National Insurance and pension contributions) in April-June. From July, employers will be required to make a contribution towards the cost of unworked hours. This will be 10% in July, 20% in August and 20% in September.
Self Employment Income Support Scheme (SEISS) grants: The fourth grant will be worth 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500. The grant will cover the period February to April, and can be claimed from late April. Self employed individuals must have filed a 19/20 self assessment tax return to be eligible for the fourth grant. There will be a fifth and final grant covering May to September. The value of the grant will be determined by a turnover test. People whose turnover has fallen by >30% will continue to receive a grant worth 80% of three months’ average trading profits, capped at £7,500. People whose turnover has fallen <30% will continue to receive a 30% grant, capped at £2,850. The final grant can be claimed from late July.
Income tax exemptions for COVID-19 tests and home office expenses: The tax and NIC exemption for COVID-19 antigen tests provided or reimbursed by employers and employer reimbursed expenses covering the cost of home office equipment, is extended through to 21-22.
Recovery Loan Scheme: From 6 April 21, the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.
Restart Grants: These will be provided in England of up up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
Statutory Sick Pay (SSP) Rebate Scheme: Small and medium-sized employers across the UK will continue to be able to reclaim up to 2 weeks of SSP costs per employee.
VAT Deferral New Payment Scheme: Any business that took advantage of the original VAT deferral on VAT returns from 20 March to 30 June 2020 can now opt to use the VAT Deferral New Payment Scheme to pay that deferred VAT in up to 11 equal payments from March 2021, rather than one larger payment due 31 March 2021, as originally announced.
Business rates relief: Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1 April 2021 to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
Business tax
Corporation tax: The rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19 and there will be taper relief for businesses between £50,000 and £250,000, so that their average rate is less than the main rate. The diverted profits tax rate will rise to 31% from April 2023.
Extended loss carry back for businesses: The trading loss carry back rule will be temporarily extended from one year to three years. This will be available for both unincorporated and incorporated businesses. These changes will be legislated in the forthcoming finance bill.
– Unincorporated businesses and companies that are not members of a group will be able to obtain relief for up to £2 million of losses in each 20/21 and 21/22 tax year.
– Companies that are members of a group will be able to obtain relief for up to £200,000 of losses in each of 20/21 and 21/22 tax year without any group limitations.
– Companies that are members of a group will be able to obtain relief for up to £2 million of losses in each of 20/21 and 21/22 tax year, but subject to a £2 million cap across the group as a whole.
Super deduction for plant and machinery: From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first year capital allowance. Investing companies will also benefit from a 50% first year allowance for qualifying special rate (including long life) assets.
Freeports: Businesses in Freeport tax sites will be able to benefit from a number of tax reliefs:
– An enhanced 10% rate of structures and buildings allowance for constructing or renovating non-residential structures and buildings within Freeport tax sites.
– An enhanced capital allowance of 100% for companies investing in plant and machinery for use in Freeport tax sites. To qualify, the strucutre of building must be brought into use on or before 30 September 2026.
– Full relief from Stamp Duty Land Tax on the purchase of land or property within Freeport tax sites in England. Land or property must be purchased and used for a qualifying commercial purpose. The relief will be available until 30 September 2026.
– Full Business Rates relief in Freeport tax sites in England. Relief will be available to all new businesses, and certain existing businesses where they expand, until 30 September 2026. Relief will apply for 5 years from the point at which each beneficiary first receives relief.
– Employer National Insurance Contributions relief for eligible employees in all Freeport tax sites from April 2022 (or when a tax site is designated if after this date). This would be available until at least April 2026 with the intention to extend for up to a further five years to April 2031, subject to a review of the relief.
Making payments of interest or royalties to connected companies in the EU: Legislation in Finance Bill 2021 will repeal the domestic legislation that gives effect to the EU Interest and Royalties Directive. The legislation currently provides an exemption from withholding tax on intra-group interest and royalty payments between UK and EU companies. Repeal will mean that from 1 June 2021 withholding taxes will apply to payments of annual interest and royalties made to EU companies subject to the terms of the relevant double taxation agreement.
R&D tax relief schemes: A consultation has been published, with the stated objective of ensuring the UK remains a competitive location for cutting edge research that the reliefs continue to be fit for purpose and that taxpayer money is effectively targeted. In addition, the government proposes bringing data and cloud computing costs into the scope of relief alongside a number of other policy options and priorities at the wider review.
Bank surcharge: This will be reviewed to make sure ensure that the combined rate of tax on banks’ profits does not increase substantially from its current level, that rates of taxation here are competitive with the UK’s major competitors in the US and the EU, and that the UK tax system is supportive of competition in the UK banking sector. Changes will be legislated in Finance Bill 21/22.
Personal Tax
Personal Allowance and higher rate threshold (HRT): The income tax Personal Allowance will rise in line with the Consumer Price Index (CPI) to £12,570 from April 2021 and will remain frozen at this level until April 2026. The income tax HRT will rise to £50,270 from April 2021 and will remain frozen at this level until April 2026.
Other provisions
Payments for employers who hire new apprentices: Employers in England who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.
High quality traineeships for young people: Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
Please see the government’s website on the budget for further information:
https://www.gov.uk/government/topical-events/budget-2021