The Spring 2021 budget was mostly about settling the economy so that the country could take full advantage of the predicted post COVID-19 recovery period and return to even better productivity than before. We have only concentrated on the announcements for England.
- The furlough scheme continues until September 2021 but from July 2021, businesses will start contributing again as happened in Summer 2020.
- If your business has made a loss during an accounting period ending between 1 April 2020 and 31 March 2022, we can set this loss against the tax paid during the previous 3 tax years (rather than just 1 tax year). We will review any loss claims already submitted for this period and correct, as necessary.
- If your business still has VAT owed to HMRC from the period March to Jun 2020, you can spread the VAT over 2-11 monthly payments interest-free using a simple online application.
- There will be one-off cash Restart Grants of up to £18,000 for hospitality, accommodation, leisure, retail, personal care & gym businesses. This will again be administered by local councils so keep an eye on their websites!
- A new UK-wide Recovery Loan Scheme offering loans between £25,000 and £10 million, plus invoice or asset finance between £1,000 and £10 million, will run from 6 April to 31 December 2021 for all businesses to help with recovery. The government will guarantee 80% of the finance, with the finance term running up to 6 years. Businesses can apply even if they have had support from an existing bounce back loan.
- Existing VAT rate of 5% for hospitality, accommodation & leisure attractions maintained until end of September 2021, followed by a rate of 12.5% until 31 March 2022.
- Eligible retail, hospitality, leisure & nursery properties will continue to receive 100% business rates relief until 30 June 2021, followed by 66% relief until March 2022.
- The Self Employment Income Support scheme will be extended to September 2021, with more people able to claim since the 2 remaining payments will be based on 2019/2020 tax returns.
- Six-month extension to £20 per week Universal Credit uplift and one-off payment of £500 to eligible Working Tax Credit claimants.
- No changes to National Insurance rates paid by the employed and employers, or to Income Tax rates.
- Class 1 NI rising to £8,840 from £8,788 for Employer’s NI & to £9,568 from £9,500 for Employee’s NI. Class 4 NI threshold is rising to £9,568 from £9,500.
- The Lower Earnings Limit remains unchanged at £6,240, which is the minimum annual employment income you need to earn to get entitlement to benefit.
- The Personal tax-free Allowance increases to £12,570 from £12,500 and the Basic Rate Tax Band increase to £50,270 from £50,000. These allowances will then be frozen until 2026.
- The annual pension allowance is only restricted where an individual’s income exceeds £200,000 with a minimum allowance of £4,000 for those with incomes over £312,000. The pension lifetime allowance is frozen at £1,073,100 until April 2026.
Capital Gains Tax
- Capital Gains Tax annual exempt amount remains at £12,300 until April 2026.
- Surprisingly, there were no other changes, at least for 2021/22 tax year!
Benefits in Kind.
- The official rate of interest remains at 2.25%. This is used to calculate the benefit in kind received by an employee on a nil interest loan greater than £10k from their employer.
- Electric only cars have 1% benefit in kind for 2021/22, rising to 3% for 2022/23. Electric only vans have 0% benefit in kind for 2021/22.
- The flat rate used to calculate the fuel benefit of a car will increase to £24,600. The flat rate used for a van will increase to £3,500 with the van fuel benefit increasing to £669.
- Employees forced to work from home can continue to be reimbursed tax-free by £6 per week. Higher rates can be claimed if the actual cost of providing the home office is calculated.
- No benefit arises on home office equipment purchases for employees working from home until 6 April 2022.
- Corporation tax will increase to 25% from April 2023 for businesses with profits over £250k. Corporation tax will remain at 19% for business with profits of £50,000 or less. A taper system will operate for businesses with profits between £50,000 – £250,000.
- The R&D tax relief for SMEs will be capped from April 2021, at £20,000 plus three times the company’s total PAYE and NIC liability for the year.
- There is a new Super Deduction scheme to encourage businesses to invest in plant and machinery assets, which will run for two years from April 2021. 130% of the cost of new plant can be deducted from the company’s taxable profits.
- The apprenticeship hiring incentive has been extended to include any new apprentices that join your organisation until 30 September 2021 and the rate is increased to £3,000.
Making Tax Digital
- VAT registered businesses with a taxable turnover below £85,000 will need to keep digital records and submit their returns under Making Tax Digital rules from April 2022.
- Self-employed businesses and landlords with annual business/property income over £10,000 will need to keep digital records & provide regular updates to HMRC from April 2023.
- HMRC is consulting on Making Tax Digital for corporation tax currently, with a focus on small businesses.
- Jessica is chair of the ICAEW working party on Making Tax Digital, working with HMRC to try to make the new Making Tax Digital rules as easy & cheap to implement as possible for businesses.
VAT & Duty
- The VAT registration threshold will continue at £85,000, and the deregistration threshold at £83k, until at least March 2024 (2 years longer than previously announced)
- The proposed reverse charge mechanism for the construction industry came into effect on 1 March 2021, where the customer accounts for the VAT on both the purchase and the sale. Please contact us directly if you are struggling with this.
- There will be a new penalty system for late VAT returns from April 2022. The penalty will be a fixed rate of £200 once a threshold of points has been exceeded, with one point received for each submission deadline that is missed. This will lead to lower VAT penalties for most 😊
- The increase in SDLT nil rate band to £500,000 will continue until 30 June 2021 when it reduces to £250,000 until 30 September 2021. From 1 October 2021, the nil rate band returns to its previous level of £125,000.
- A new mortgage guarantee scheme will enable all UK homebuyers to secure a mortgage of up to £600,000 with a 5% deposit.
- As so many of you are aware, the off payroll working rules (IR35) comes into force in the private sector for medium & large businesses for work completed after 5 April 2021.
- The legal limit for single contactless payments will increase from £45 to £100 later this year, which pushes the UK further into a cashless economy.
- Inheritance tax thresholds will be frozen until April 2026.
- No increases to fuel or alcohol duty until April 2022.