Spring 2021 Budget - main points for small businesses3rd of March, 2021
Budget Spring 2021
The Budget today was generally positive for small businesses and companies.
In Summary the COVID support framework has been extended and there are no changes to Income Tax, National Insurance or VAT rates.
There are also no changes to Inheritance Tax thresholds and rates: Capital Gains Tax thresholds and rates or the Lifetime allowance for Pensions.
There are no changes to fuel duty or duty on alcohol.
The main tax and COVID support impacts are set out below – in summary form:
This will continue until 30 September 2021. Employees on Furlough will continue to get 80% of wages.
Employers will continue to have to pay Employer’s National Insurance contributions and pension contributions.
For July 2021, employers will need to contribute 10% of wages, so can only claim 70%.
For August and September 2021, employers will need to contribute 20% of wages, so can only claim 60%.
Again part time furlough claims will be allowed. We’ve been here before!
Self Employment Income Support Scheme
This will also continue with Grant 4, to cover February to April 2021 being claimable at 80% of average trading profits on the same basis as previously.
Grant 5 will open from late July, but the full 80% will only be available to those whose turnover has fallen by 30% or more and only 30% of the grant will be available if turnover has fallen by more than 30%. The full grant is capped at £7,500. We will need to see the detail for exactly how this is to be calculated.
There is a new condition – that it is necessary to have filed a 19/20 Tax Return by 2 March 2021 in order to claim Grant 4 and Grant 5. Individuals who were newly trading and therefore not eligible for Grants 1, 2 and 3, can now be eligible for Grant 4 and Grant 5.
The 5% rate of VAT for the hospitality, retail and leisure sector is being continued at that rate until 30 September 2021. It will then be at 12.5% until 31 March 2022.
2020 VAT deferral
For those who took advantage of the opportunity to defer VAT in the summer of 2020 and who would have had to have paid back the full amount by 31 March 2021, there is now the VAT deferral New Payment Scheme – which allow you to pay the amount back in up to 11 equal payments from March 2021. We are yet to establish the “how”.
Business rates relief – Retail, hospitality and leisure sector
The relief has been extended and there will be 100% relief for the period 1 April 2021 – 30 June 2021, followed by 66% relief for the period 1 July 2021 – 31 March 2022.
Restart Grants – England only
Up to £6,000 per premises for non-essential retail
Up to £18,000 for hospitality, accommodation, leisure, personal care (including gyms).
We will have to see what the Scottish equivalent of this support will be.
For those businesses (companies and sole traders) who incur losses in 2020/2021 and 2021/2022, there is an opportunity to carry back the loss against previous tax paid over the previous 3 tax years, thereby generating a tax repayment. The usual situation is that losses (apart from in the first four years of trading) can only be carried back for 1 year. This if for losses of up to £2m in each year.
Recovery Loan Scheme
From 6 April 2021, it will be possible to apply for a Recovery Loan. This is in effect a continuation of the Bounce Back Loan and the CBIL which will finish at the end of March.
The Government is offering an 80% guarantee and the scheme will be open to all, even if previous loans have been claimed. The scheme is for loans of between £25k and £10m.
But as with the previous two schemes, the Banks will be putting their own spin on the final details.
There is no change to the Corporation Tax rate until 2023, when it will increase to 25%, from 19%, but this is only for Companies with profits of > £50,000.
For Companies with profits of between £50,000 and £250,000, there will be a tapering progression to the top rate.
Working Tax Credit
Eligible claimants will receive a one-off payment of £500.
“Super deduction” for capital expenditure
There will be a “Super deduction” of tax relief for capital expenditure incurred by Companies (not sole traders). At present companies and sole traders can claim back 100% of expenditure on capital items and now at 130% relief, there is an added incentive for companies to invest.
Personal allowance, Higher rate threshold and NICs threshold
The personal allowance will increase for 2021/2022 to £12,570 and the NICs threshold to £9,568 but both will then be frozen until April 2026. With the Higher rate threshold there is some variation here between Scotland and England. In England the higher rate threshold will increase to £50,270, but in Scotland, this is at a much lower level - £43,430.
Mortgage Guarantee Scheme – UK Wide
From April 2021, the government will guarantee mortgages for those buyers who have only a 5% deposit – up to £600k, which should help First time buyers. This will go on until 31 December 2022.
Stamp Duty – England only
The higher thresholds for Stamp Duty brought in due to COVID will be extended in England until 30 June 2021. These would have reverted to pre-Covid levels after 31 March 2021. We will have to see whether the reduction to Scottish Land and Buildings Transaction Tax (LBTT) threshold is also extended.
Apprenticeships – England only
The Chancellor increased the amounts available for hiring a new apprentice between 1 April 2021 and 30 September 2021 from £1,500 per hire to £3,000 per hire. (£2,000 for an apprentice under 24 years old). These amounts are in addition to £1,000 due to employers for 16 – 18 year old apprentices.
Additionally in England £1,000 is available per trainee for offering work placements and training to 16 – 24 year olds.
Apprenticeships – Scotland – announced December 2020
This is a link to information concerning this funding. An employer can receive £5,000 for taking on and training an apprentice.
Also is the Kickstart scheme.
HMRC, tax evasion/avoidance and penalties
£180m is to go to HMRC for extra resources and technology. HMRC are expected to generate over 1.6bn of additional tax revenues.
From 1 April 2022 there will be changes to the penalty regime for VAT and from 6 April 2023 for those filing tax returns > £10k and from 6 April 2024 for those < £10k.
HMRC will be seeking to harmonise the currently disparate late filing and late payment penalty regimes between VAT and Self Assessment over this time scale.
The Chancellor announced 8 freeport areas in England and also the extension of funding in four named areas of Scotland:
Argyle and Bute; Ayrshire and Falkirk are to have their Growth Deals accelerated
Aberdeen is to have £27m for the Aberdeen Energy Transition Zone
£5m for a Global Underwater Hub – based in Scotland – Very James Bond!
The Budget included a lot else besides and the full 107 page Budget report can be accessed using the link below. Happy Reading!
© MacDonald Accountancy Services Limited 3 March 2021