PWA BUDGET 2021 BRIEFING
Self-Employment Income Support Scheme
The fourth SEISS grant, covering February to April, will be paid in line with previous SEISS grants at 80% of average trading profits, up to a maximum of £2,500 a month.
A fifth and final SEISS grant, covering May through September will be available focusing largely on those still most affected by the pandemic. Individuals who have seen turnover fall by 30% or more will continue to receive 80% of three months’ average trading profits, up to £7,500 cap. Where turnover has fallen by less than 30%, then the grant received will only be 30% and this will be capped at £2,850.
Individuals who were newly self-employed in the 2019/20 tax year were unable to receive the first three grants. However, they will be able to claim the 4th and 5th grants.
The Government will spend £100m to set up a new Taxpayer Protection Taskforce of 1,265 HMRC staff who will focus on investigating fraudulent claims under the Coronavirus Job Retention Scheme and Self Employed Income Support Scheme.
Now extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked.
Employers will be required to pay 10% towards the hours their employees cannot work in July, followed by 20% in August and September. This is in addition to the employer’s national insurance and pension contributions they are already paying on hours not worked by employees.
From 1st May 2021 an employer can claim for those who were employed on 2nd March 2021, as long as an PAYE RTI submission was made between 20th March 2020 and 2nd March 2021, notifying a payment of earnings for that employee.
The Chancellor did not change Income Tax or National Insurance Contributions rates.
There were no changes to Inheritance Tax or Capital Gains Tax. The Government intends to freeze the Capital Gains Tax annual exempt amount at its current level of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements for the next 5 years (up to and including 2025/26).
Personal allowance increased to £12,570 from 6 April 2021 then frozen until 5 April 2026. Higher rate threshold increased to £50,270 from 6 April 2021 then frozen until 5 April 2026.
Inheritance Tax nil rate band, Pensions Lifetime Allowance, Capital Gains Tax annual exempt amount frozen until 5 April 2026. The Government intend to maintain the IHT tax-free thresholds and the residence nil rate band taper available for Inheritance Tax at their 2020/21 tax year levels for the next 5 years (up to and including 2025/26).
This means qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can potentially continue to pass on up to £1 million of assets without an Inheritance Tax liability.
The stamp duty holiday in England and Northern Ireland has been extended until 30th June.
Stamp duty land tax (SDLT) remains suspended on the first £500,000 of all property sales.
Beyond 30th June 2021, the nil rate threshold for SDLT will be set at £250,000 until 30th September 2021 before returning to its usual threshold of £125,000 on 1st October 2021.
Restart Grants for England
In a bid to support the reopening of non-essential retailers, as well as the hospitality and leisure sectors, the Government is launching Restart Grants open to businesses throughout England.
Non-essential retail businesses will be able to claim for cash grants up to £6,000 per premises, while hospitality, accommodation, leisure, personal care and gym businesses can claim up to £18,000 per premises given their later reopening date.
Recovery Loan Scheme
UK businesses of any size can apply for loans or overdrafts from £25,000 to a maximum of £10 million until the end of this year. Invoice and asset finance will also be made available to provide finance worth between £1,000 and £10 million. Finance under the new scheme will be backed by an 80% Government guarantee to encourage banks to continue to lend confidently.
Business Rates Reduction (England-only)
Eligible retail, hospitality and leisure businesses across England are to have an extension to the 100% business rates holiday until 30th June 2021. The Chancellor confirmed that business rates would continue to be discounted by two-thirds for the remainder of the 2021-22 tax year, subject to caps for larger businesses.
VAT for hospitality, holiday accommodation and attractions
The reduction in VAT to 5% for the UK’s tourism and hospitality sector has been extended until 30th September 2021. After this period, VAT for these sectors will rise to 12.5% for a further six months until March 2022, before returning to the standard rate of 20% from April 2022.
Mortgage Guarantee Scheme
The Chancellor also confirmed the launch of a new low-deposit mortgage guarantee scheme, providing up to 95% loan-to-value (LTV) mortgages.
The Government-backed scheme provides certainty to lenders to broaden their eligibility criteria to buyers with only small deposits.
The new 95% mortgages available under the Mortgage Guarantee Scheme will be available on properties up to a value of £600,000.
Under the scheme all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31st December 2022, will increase the availability of mortgages on new or existing properties for those with small deposits.
From April 2021, the financial incentive to employ new apprentices in England will increase from £1,500 or £2,000 depending on age, to £3,000 per apprentice. This is in addition to the existing £1,000 provided for all new 16-18 year-old apprentices, and those under 25 with an Education, Health and Care Plan.
There is a limit on the total value of pension benefits you can build up without getting a tax charge when you come to draw your pension. This limit is known as the lifetime allowance and is currently £1,073,100. The Government intends to remove the link to the Consumer Price Index increase for the next five years and freeze the standard lifetime allowance at £1,073,100.
The £20-a-week Universal Credit uplift will continue for an additional six months.
Alcohol, fuel and tobacco duties
There are no increases to alcohol duties. Fuel duty has also been frozen for the 11th consecutive year.
Tobacco duty had previously increased by 2% plus inflation, with the rate for hand-rolling tobacco increasing by 6% plus inflation.
Companies and Small Businesses
Corporation tax rates are to set rise from 19% to 25% from 5th April 2023.
There will be a new Small Profits Rate of 19% for companies with annual profits of £50,000 or less.
Companies with profits between £50,000 and £250,000 will pay tax at the main rate of 25% reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
Super – deduction relief
In a bid to encourage capital expenditure and business growth, the Chancellor has unveiled a new ‘Super Deduction’ tax relief.
This relief will only apply to companies and will not be available to sole traders or partnerships.
This measure will temporarily introduce increased reliefs for expenditure on plant and machinery. For qualifying capital expenditure incurred from 1st April 2021 up to 31st March 2023, companies can claim in the period of investment:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances
The annual investment allowance (AIA) limit will be £1 million for the period from 1st January to 31st December 2021.
As the super deduction will not be available to sole traders and unincorporated businesses, they will continue to claim the first year allowance of 100% on eligible capital expenditure.
To help businesses, which have found themselves in a loss-making position, the trading loss carry back rules for unincorporated business (sole traders and partnerships) and companies will be temporarily extended from one year to three years.
This will enable carry back of relief for losses of up to £2 million in each of 2020/21 and 2021/22 for unincorporated businesses and companies which are not a member of a corporate group.
Research & Development (R&D)
Small and medium sized businesses will see a cap of their R&D tax credit of £20,000 plus three times the company’s total PAYE and NIC liability for accounting periods beginning on or after 1st April 2021.
The Chancellor also announced in the budget the launch of a wide-ranging consultation on (R&D) tax relief to ensure the UK remains a competitive location for research.
Help to Grow Scheme
The aim is to provide industry leading support to growing businesses. The Help to Grow Management programme will offer management training via business schools, with the Government contributing to 90% of training costs.
The Help to Grow Digital programme will provide free expert training and will be delivered by a combination of a voucher covering up to 50% of approved software costs up to a maximum of £5,000 with free online impartial advice.
New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas
Contactless payment limit will rise to £100 later this year
750 UK civil servants to be relocated to new Treasury campus in Darlington
£1bn fund to promote regeneration in a further 45 English towns, including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich
£150m for community groups to take over pubs at risk of closure
First eight sites announced for freeports in England: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside
Consultations launched on improving the competitiveness of the UK’s R&D tax credit schemes.
Withholding tax exemption for cross-border payments of interest and royalties to associated companies in the EU to be abolished from 1 June 2021.