Unsurprisingly, pandemic support measures as well as plans to recoup the cost generated by the pandemic were the key drivers in the Spring Budget 2021, announced yesterday (3rd March).
There were some really big announcements made yesterday, some potentially a little confusing, we’re going to list out the biggest changes affecting our clients in this blog. Of course if you have any concerns about how these changes could affect your business or personal finances please do reach out to your accountant for advice.
Coronavirus Job Retention Scheme (CJRS)
The CJRS, aka furlough scheme, will be extended in its current form – 80% of salary for hours unworked (capped at £2,500/month) – until September 2021. One big change is that employers will be asked to contribute towards the employee’s salary in July (10%), and throughout August and September (20%). We are awaiting further details on this point and will update our blog in due course. The scheme still calls for the employer to pay pension and NI contributions.
Many are pointing out that the current roadmap out of lockdown would see us return to ‘normal’ in June 2020, so why announce the extension until September? There are two good reasons for this: Firstly, as we’ve seen time and time again, this virus is unpredictable and we do not know for sure what will happen, the current estimates for a return to normal life may need to be extended or scrapped and re-thought depending on the situation at the time. Secondly, as stated above, employers need the confidence that support will be available to justify fighting on. And even once businesses open up there may be less demand resulting in lower income for businesses – so some employees may well need to remain on furlough until the economy recovers a little.
Self-Employment Income Support Scheme (SEISS)
Similarly, an extension to the SEISS will be available, following the same quarterly grant template as before, also providing up to 80%* of average trading profits. The fourth grant covers Feb – April 2021, and a fifth grant will cover May – July 2021.
A key difference for the fifth grant will be that the 80% grant will only be accessible to those whose turnover has fallen by 30% or more. If turnover has fallen by less than 30% the grant available will be at 30% of average trading profits.
In addition, the government have finally responded to the criticism of neglecting to support anyone who was newly self-employed in the tax year immediately preceding the pandemic. These individuals were not eligible for any support at all, leading many to be forced to abandon their new businesses. Anyone who began self-employment in the 2019-20 tax year, who also submitted their self-assessment tax return by midnight on 28th Feb 2021 will now be able to claim the fourth and fifth grants. No back-dated support will be available, so we feel this is a long way off the type of support these people deserve.
Businesses which have been forcibly closed could benefit from a new Restart Grant. Non-essential retail businesses, which will be the first to re-open, can claim a grant of up to £6,000 per premise. Hospitality and leisure settings which will be opening later will be eligible for grants of up to £18,000. We’ll provide more information about restart grants as it becomes available.
Corporation tax will rise to 25% from 1st April 2023… but only for some businesses.
If your annual profits are under £50,000 your corporation tax rate will remain at 19%. For companies with profits over £50,000 there will be a tapering of the corporation tax rate all the way up to profits of £250,000+. Only businesses with annual profits over £250,000 will pay the full 25% rate.
Tapering is equivalent to a marginal tax rate of 26.5% on profits between £50,000 and £250,000.
Close Investment Holding Companies will pay 25% irrespective of their profit level.
Recovery Loan Scheme
A new scheme to replace the Bounce Back Loan and the Coronavirus business Interruption Loan will become available. The Recovery Loan Scheme will provide businesses with loans of £25,000 – £10 million, 80% backed by the government, and this will be available until the end of 2021.
Business Rates Holiday
The 100% business rates holiday for retail, hospitality and leisure businesses will be extended until the end of June 2021. From July onwards these rates will remain discounted by 66%.
Hospitality and Tourism VAT Rates
The 5% VAT rate will apply until the end of September and will be followed by a tapered rate of 12.5% from October to the end of March 2022, before returning to 20% in April 2022.
Super Deduction Capital Allowance
A ‘Super Deduction’ capital allowance was also announced by the Chancellor, “We’ve never tried this before in our country – the Office for Budget Responsibility (OBR) says it will boost investment by £20bn a year. It is worth £25bn for the two years it is in place, this is bold, unprecedented action.”
So from the start of April 2021 until the end of March 2023 a company investing in certain plant machinery assets can claim 130% super-deduction capital allowance on these investments and a 50% first year allowance for other qualifying special rates assets.
We stand by the old saying ‘if it seems too good to be true, it probably is!’ – do your calculations on this one, you may be better off waiting until after 2023! We will explain further in our next blog, but please do speak to your accountant before planning to take advantage of Super Deduction Capital Allowance.
While personal allowance will increase to £12,570 in 2022 for basic rate taxpayers, and the threshold for higher rate will increase to £50,270 as planned, these allowances will remain at these levels until 2026.
Other Personal Taxes
Pension lifetime allowance and Inheritance Tax will be frozen until 2026.
The popular stamp duty holiday is to be extended until the end of June 2021 for properties under £500,000, and then from July – September 2021 the nil rate will apply to properties up to £250,000 before returning to its current level of £125,000 from October 2021 onwards.
A new 5% deposit mortgage guarantee scheme was also announced, with many big mortgage lenders set to announce their new 95% mortgage products at the start of April.