Key 2021 budget announcements that may affect our clients.

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.

COVID-19 support

  • 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.

Personal Tax

  • 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.

Business

  • 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 😊

Stamp Duty

  • 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.

Contractors

  • 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.

Other

  • 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.

 

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