On 3rd March 2021, The Chancellor, Rishi Sunak, presented the spring 2021 Budget. Considering the challenges the pandemic has imposed on the UK, the first post-COVID budget contained a number of measures aimed at both supporting businesses and individuals at present, whilst preparing for the economic recovery as we move out of the pandemic.
Coronavirus Job Retention Scheme (CJRS)
If you current or have previously placed employees on full or flexible furlough, you will be able to continue to claim support via the Coronavirus Job Retention Scheme for pay periods up to the end of September.
From now until the end of June, you can claim 80% of your employee’s normal pay for their unworked hours, subject to the cap of £2,500. From 1st July 2021, while your employees must continue to receive 80% of their normal pay for their furloughed hours, you can only claim 70% via CJRS. From 1st August 2021, you will only be able to claim 60%, and this will remain in place until 30th September 2021 when the scheme comes to an end. Please not, you must pay the remaining 10% in July and the remaining 20% August and September. As now, you must meet the employer’s National Insurance and employer pension contributions on all payments to employees.
Self-Employed Income Support Scheme (SEISS)
If you are currently self-employed and are continuing to be adversely affected by the pandemic, a further two grants have been made available under the SEISS.
Support under the SEISS was not available to those who commenced self-employment in 2019/20, however, as the deadline for submitting the 2019/20 tax return has now passed, these individuals may now be eligible to claim this.
To qualify, your business must be adversely affected by the pandemic and your profits from self-employment must be at least 50% of your income and less than £50,000.
The fourth grant under the scheme covers February to April 2021. It is worth three months’ average profits capped at £7,500. It can be claimed from late April.
The fifth and final grant covers the period from May to September 2021. The amount of the grant will depend on the impact that Covid-19 has had on your profits. If your turnover has fallen by 30% or more because of Covid-19, you will be able to claim a grant equal to 80% of your average profits for three months, capped at £7,500. However, if your turnover has dropped by less than 30%, you will be entitled to a reduced grant of 30% of three months’ average profits, capped at £2,880. The final grant can be claimed from late July.
Please note, if you are not currently registered for VAT, and you are concerned that in receiving the grants, you may exceed the £85,000 VAT registration threshold, please be aware that the SEISS grants are not included when calculating a rolling 12-month turnover for this purpose.
As was widely speculated and reported, non-essential retail and hospitality venues will be eligible for grants to help them ‘restart’.
A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England. Non-essential retail, which has tended to open first, can apply for a one-off grant of £6,000.
Business Rates Holiday
The government will continue the 100% business rates holiday through to the end of June 2021 for the retail, hospitality and leisure sectors.
For the remaining nine months of the financial year, through to March 2022, business rates will be discounted by two thirds, up to a value of £2million, capped lower for those businesses who have been able to remain open.
Recovery Loan Scheme
The Bounce Back Loans & Coronavirus Business Interruptions Loan Schemes will finish on 31st March 2021. In their place, a new recovery loan scheme will be launched from 6th April 2021, which will allow loans of between £25,001 and £10million, 80% of which will be government-backed. For loans less that £250,000 there will be no personal guarantee.
In a welcome bonus for the badly affected hospitality, holiday accommodation and attractions sector, the reduced rate of VAT of 5% will continue until 30th September 2021. For the following six months until 31st March 2022, a new reduced rate of 12.5% will be in effect, at the point where it will revert to the 20% standard rate.
VAT Deferral Scheme
If you deferred a VAT payment that was due to be paid between 20th March 2020 and 30th June 2020, and still have this outstanding to make, HMRC have introduced a new VAT deferral scheme that will enable you to make equal, monthly interest-free payments of your outstanding liability up to 11 instalments.
The number of instalments available depends on the date you join the scheme. To utilise the full 11 instalments, you will need to join the scheme by 19th March 2021.
VAT Threshold Changes
The VAT threshold for both registration and de-registration, currently set at £85,000 and £83,000 respectively will remain the same until 31st March 2024.
Extension of Making Tax Digital
Confirmation that Making Tax Digital (MTD) for VAT registration will apply to all businesses from 1st April 2022.
Corporation Tax Changes
As was anticipated, there will be increases in Corporation Tax in the future, and only for larger more profitable companies.
From 1st April 2023 there will be two rates of Corporation Tax. For businesses who make taxable profits of less than £50,000 will continue to be taxed at the current rate of 19%. Businesses who have taxable profits of in excess of £250,000 will be taxed at the new rate of 25%.
Profits in between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for short accounting periods.
Income Tax and National Insurance
The basic rate threshold is increasing to £37,700 for the 2021/22 tax year from the current £37,500, and will then be frozen at this rate until April 2026. For same period, the Personal Allowance will increase to £12,570 from £12,500 and will then remain the same.
NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.
The basic rate of tax will remain at 20%, the higher rate at 40% and the additional rate at 45%. Although it has been reported that there is no increase to income tax, the freezing of the abovementioned thresholds, could result in individuals paying more tax, for example, if your wage increases as a result of inflation.
Carry back of trading losses
Companies, like unincorporated businesses, can benefit from a measure allowing losses to be carried back for three years, rather than for one year. For companies, this applies to losses incurred in accounting periods ending between 1 April 2020 and 31 March 2021 and to losses for accounting periods ending between 1 April 2021 and 30 March 2022. Losses carried back must be used against a later period before an earlier period.
This measure may provide you with earlier relief for losses suffered because of the Covid-19 pandemic and generate a useful tax repayment at a time where cash flow is tight.
Super-Deduction for investment expenditure
A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.
The super-deduction will mean that assets that qualify for the main rate of capital allowances 18% will qualify for tax relief based on 130% of the actual cost of expenditure incurred. This means that for every £100 that you spend, £130 will be deducted when calculating your taxable profits.
Assets that qualify for the special rate writing down allowances (6%) relief will qualify for the 50% first year allowance, although claiming the annual investment allowance instead where this is available will be more beneficial.
This is a reason to delay expenditure if you were planning to buy equipment before April.
The existing Annual Investment Allowance limit of £1million will continue to be available until 31 December 2021.
- The recent increase to Universal Credit of £20 per week will be extended for six months.
- The National Living Wage will increase to £8.91 per hour from 1st April 2021.
- Duties of alcoholic drinks and fuel will remain the same.
- HMRC has been given a £100million budget to create a COVID task force to crack down on individuals who have exploited the various support schemes that have been made available.
- In anticipation of consumer spending increasing ten-fold, the legal limit for a single contactless payment will increase to £100.
Over the days and weeks to come, further details will be released and we will continue to provide you will updates and details of these to support you as we transition into a post-pandemic society over the next year. If you have any queries or questions regarding any of the support packages and changes outlined, please do not hesitate to get in touch.
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