Okay, so perhaps this Blog is not that short but we've tried to just focus on the main points. So now we know ….. the chancellor has delivered his budget and although it was broadly in line with what was speculated there were a couple of surprises. The budget was always going to be geared towards business, the economic recovery from Covid and how the books will eventually be balanced. No surprises then that there are tax rises coming but in the very short term its mainly positive news for businesses.
As always we recommend you check the full details rather than just listening to the media headlines!
Covid Business Support
Coronavirus Job Retention Scheme (CJRS) – our affectionate friend the Furlough Scheme will be extended to the end of September with employees receiving 80% of their pay. However, similar to last year Employers will have to start making a contribution…… 10% in July 21 and then 20% in August and September 21.
Self Employed Income Support Scheme (SEISS) – A 4th grant of 80% covering the period February 21 to April 21. A 5th grant to cover May, June, and July, to be available over the summer.
Points to note - with the 5th grant, if your turnover has fallen by 30% or more, you’ll receive the full 80% grant. If turnover has fallen by less than 30%, then the grant is reduced to 30%.
Some further good news for the self-employed…. Previously to qualify for the SEISS, you must have traded in the tax year 2018/19 and submitted your Self-Assessment tax return on or before 23rd April 2020 for that year.
To be eligible for the 4th and 5th grants the government has extended the qualifying period and it now encompasses those who completed a Self-Assessment tax return for the 2019/20 tax year (by midnight on 2nd March 2021). All other eligibility criteria will remain the same as the previous grants. Further details are yet to be published.New Restart Grants - The local restriction grants will cease at the end of March 2021 and be replaced by the Restart Grant. These grants are aimed at helping businesses reopen when lockdown begins to ease from April 2021
- Non-essential retail businesses will receive grants up to £6k per premises.
- Businesses which are more impacted by restrictions and may not open until later in the year such as hospitality and leisure, including personal care and gyms, can each receive grants of up to £18k.
Business Loans – The previous loan schemes Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) will close as planned on 31st March 2021.
A new Recovery Loan Scheme will then be available from 6th April 2021 and be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes. This will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. Further details are yet to be published.
Business Rates - 1st April 2021 to 30th June 202, eligible properties for retail, hospitality and leisure will continue to receive 100% business rates relief 1st July 2021 to 31st March 2022 there will be a 66% business rates relief. This will be capped at £2 million per business for properties that were required to be closed on 5th January 2021, or £105,000 per business for other eligible properties.
Corporation Tax – There was a lot of speculation on this particular tax and its mixed news dependent on the size of the business. The good news is nothing is changing for 2 years, but from April 2023:
- Businesses with more than £250k profits will pay corporation tax at a rate of 25%.
- Businesses with profits of between £50k and £250k will pay a tapered rate of corporation tax between 19% and 25%.
- Businesses with less than £50k in profit will be unaffected and will continue to pay corporation tax at a rate of 19%
Loss Carry Backs – previously businesses were allowed losses to be carried back for 1 year. This will now change, and businesses can carry back losses of up to £2m for 3 years. CAUTION – we recommend you seek expert advice on this before taking this option!
Investment tax relief – The chancellor branded this as the new Super Deduction. This is a tax relief for businesses enabling them to reduce their tax bill by 130% of what they spend on investment. Further details are yet to be published.
VAT – The cut 5% rate currently being applied in the hospitality and leisure industry will be remain in place to the end of September 2021. From October 2021 to March 2022 the rate will increase to 12.5% and then return to 20% from April 2022. The registration threshold of £85k remains unchanged until April 2024.
The Other Highlights
Apprentice Grants – If you take on an apprentice and enrol them in the Government scheme business can now get a £3k grant, double the previous grant.
Personal Allowance – Remains at £12,500 until April 2022 and then it increases to £12,570. There it will stay until 2026.
Higher Rate Threshold – Remain at £50,000 until April 2022 and then it increases to £50,270 There it will stay until 2026.
Other Allowances – there was no change in other allowances
- Inheritance Tax threshold remains at £325,000 and will be maintained up to 2026.
- Pensions Lifetime Allowance remains at £1,073,100 and will be maintained at that level up to 2026.
- Capital Gains Tax remains at £12,300 and will be maintained at that level up to 2026.
- Personal Savings The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2021-22.
- The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.
- The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.
Stamp Duty Land Tax – The stamp duty holiday for the first £500k nil rate band will remain until the end of June 2021. From 1st July 2021 the nil rate band will reduce £250k until 30th September, before reducing back down to £125k from 1st October 2021 onwards.
95% Mortgages – This scheme will provide a guarantee to lenders who offer mortgages to people with a deposit of just 5% (for homes with a value of up to £600k). All buyers will have the opportunity to fix their initial mortgage rate for at least five years. This new scheme will be in place up to 31st December 2022
Universal and Working Tax Credits - The temporary additional £20 Universal Credit uplift will be extended by a further 6 months There is also a £500 one-off payment for eligible Working Tax Credit claimants.
HMRC Task Force – The chancellor is spending £100m (obviously he sees this as an investment) on setting up a new task force to further investigate tax avoidance / evasion. Our guess is this is also an extension to the resources for tracking down fraudulent CJRS, SEISS claims.
There’s a lot to take in there, but if you’d like to talk through any of the changes, drop us a quick email and we’ll get some time booked in.