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Here's a quick summary of the key measures announced in the Chancellor's 2021 Budget:
- As previously announced, the income tax personal allowance will rise to £12,570 from 6 April 2021 and will remain at this level until 5 April 2026
- The income tax higher rate threshold will rise, as had been announced, to £50,270 from 6 April 2021 and will remain at this level until 5 April 2026
- The primary threshold for National Insurance contributions will increase to £9,568 from £9,500 from 6 April 2021
- The National Insurance upper earnings limit and upper profits limit will rise to £50,270, in line with the income tax higher rate threshold and will remain at this level until 5 April 2026
- The lifetime allowance for pension savings will remain at £1,073,100 and will stay at this level until 5 April 2026
- The rates of capital gains tax will remain unchanged in 2021/22, and the annual exemption will remain at £12,300 for individuals until 5 April 2026
- The business asset disposal relief lifetime allowance will remain at £1 million
- The inheritance tax nil-rate band will stay at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million until 5 April 2026
- The Self-Employed Income Support Scheme (SEISS) has been extended until 30 September 2021. A fourth grant will cover the period from February until April 2021 and will cover 80% of three months’ average trading profits, capped at £7,500 in total.
- A fifth and final grant will cover the period from May to September 2021. For this grant, people whose turnover has fallen by 30% or more will continue to receive the full grant covering 80% of three months’ average trading profits, capped at £7,500. Those whose profits have fallen by less than 30% will receive a grant of 30% of three months’ average trading profits, capped at £2,850.
- Newly self-employed individuals may be able to claim the fourth and fifth grants, if they have filed their 2019/2020 self-assessment tax return and meet the other eligibility criteria
- The rate of corporation tax will remain at 19% until 31 March 2023
- From 1 April 2023, the rate of corporation tax will increase to 25% on profits in excess of £250,000. A small profits rate of 19% will apply to profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
- The diverted profits tax rate will rise from 25% to 31% from 1 April 2023, in line with the increase in the main rate of corporation tax
- From 1 April 2021 until 31 March 2023, through a new super-deduction, companies investing in qualifying brand new plant and machinery assets will benefit from a 130% first-year capital allowance. For qualifying special rate assets, a 50% first-year allowance will apply.
- The period over which businesses can carry back trading losses has been temporarily extended from one year to three years, for company accounting periods ending between 1 April 2020 and 31 March 2022 and for tax years 2020/21 and 2021/22 of unincorporated businesses. This is subject to a cap of £2 million of unused losses for each qualifying year.
- The amount of SME payable R&D tax credit that businesses can receive in one year will be capped at £20,000 (plus three times the company’s total PAYE and NICs liability) for accounting periods beginning on or after 1 April 2021
- From 1 June 2021, the UK will no longer apply the EU interest and royalties directive to outbound payments. Withholding taxes will apply to payments of annual interest and royalties made to EU companies, subject to the terms of the relevant double taxation agreement.
- From 6 April 2021, a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. All businesses trading in the UK will be eligible to apply and the scheme will be open until 31 December 2021.
- The 100% business rates relief for eligible retail, hospitality and leisure properties in England has been extended until 30 June 2021. This will be followed by 66% relief for the period from 1 July 2021 until 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
- Restart grants will be introduced from April 2021 to assist businesses in re-opening. These entitle non-essential retail businesses to grants of up to £6,000 per premises and hospitality, accommodation, leisure, personal care and gym businesses to grants of up to £18,000 per premises.
- The statutory sick pay (SSP) Rebate Scheme has been extended, so that small and medium sized employers across the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee
- National living wage will increase to £8.91 per hour from 6 April 2021
- As previously announced, a few technical changes will be made to the IR35 rules in the Finance Bill 2021, including clarification on the definition of an intermediary
- The Coronavirus Job Retention scheme (CJRS) will be extended until 30 September 2021. Employees will continue to receive 80% of their wages (capped at £2,500 per month) and employers will be asked to contribute to this from July.
- Employers will receive an increased government payment of £3,000 for each new apprentice hired between 1 April and 30 September 2021, regardless of their age
- The temporary exemption from income tax and NIC for the re-imbursement of qualifying home office equipment by employers will be extended to 5 April 2022
- The government has introduced a new Mortgage Guarantee Scheme, which will run from April 2021 to December 2022 to provide guarantees to lenders offering mortgages to people with deposits of 5% on homes with a value of up to £600,000
- The temporary stamp duty land tax (SDLT) cut has been extended, with the residential £500,000 nil-rate band in England and Northern Ireland remaining in place until 30th June 2021. From 1 July until 31 September 2021, the nil-rate band will reduce to £250,000 before returning to £125,000 from 1 October 2021.
- The VAT registration and deregistration thresholds have been frozen at £85,000 until 31 March 2024
- The reduced rate of VAT of 5% on goods and services supplied by the hospitality and tourism sectors has been extended until 30 September 2021. From 1 October, an interim rate of 12.5% will remain in effect until 31 March 2022.
- The government will consult on the Enterprise Management Incentives (EMI) scheme to ensure it provides adequate support for high-growth companies
- Another consultation will focus on R&D reliefs and to explore the nature of private-sector R&D investment in the UK and where changes may be appropriate