The 2021 Budget outcomes.
Following the global pandemic’s financial ruinations that have hit us all so hard, then further intensified by the uncertainties of Brexit, is it any wonder the country watched keenly for the announcements from the Chancellor of the Exchequer regarding the recent Budget.
Rishi Sunak, a name and position that probably school children are now familiar with, was expected to confirm what the Treasury had been briefing journalists on, regarding a program of tax rises to repair and rebuild the public finances. The British public prepared and waited anxiously for the forecasts to be pronounced, yet for many, the blow was not as hard as anticipated.
The Office for Budget Responsibility (OBR) publishes forecasts, previously set in November 2020, and as the government’s fiscal watchdog it quoted the Chancellors words to “level with the people”.
Yet a lot has changed in these four months, beginning with the December and January spikes in Covid cases and prompting a stringent third lockdown depressing the expected growth further in 2021. However, the OBR believe the economy will grow by 4% in 2021, slightly down than their expected 5.5%, but they are projecting a 7.3% increase in 2022 which is the fastest rate in eight decades.
The Coronavirus job retention scheme has been extended to 30th September 2021 with the grant covering 80% of an employee’s wages, maintained from July 1st with 70% from the CJRS and 10% by the employer. The SEISS, or self-employed income support scheme fourth and fifth grant periods, February to April and May to September, are in place, capped at £7,500, though self-assessment forms must have been filed for 2019/20 by 2nd March 2021. It’s also worth noting that the fifth SEISS grant will be scrutinised based on a loss of revenue of 30% or more, ie those losing less than 30% will see a significant reduction in what can be claimed.
The Recovery Loan Scheme launches on 6th April until 31st December, ensuring businesses of any size can continue to access loans and finance on those eligible, between £25,000 and £10 million, providing support as businesses recover, with the Government guaranteeing 80% of the finance to the lender. Also in April the Restart Grant launches, offering up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for Gyms, Leisure, personal care, accommodation, and hospitality as an aid to help these sectors reopen.
The Government also announced the “Help to Grow” scheme introducing a 12 week programme to encourage new businesses to capitalise on training in strategic skills and key modules covering financial management, innovation and digital adoption which includes combining a voucher to cover half the costs of approved software to a maximum of £5,000.
Business & Property tax
For expenditures incurred from 1st April 2021 until the end of March 2023, companies can claim 130% capital allowance on qualifying plant and machinery investments and for every £1 invested, their taxes are cut by 25p. The temporary increase to the nil rate band for Stamp Duty Land Tax (SDLT) of £500,000 has been extended from 31st March 2021 to 30th June 2021, then 1st July 2021 to 30th September it will reduce to £250,000, tapering to the standard amount of £125,000 on 1st October.
There is also a new VAT deferral payment scheme. Businesses that took advantage of VAT deferral from 20 March-30th June 2020 can now repay over 11 months from March 2021, and VAT reduction for UK tourism and hospitality sector has been extended, so the temporary 5% is now expiring on 30 September 2021. From there it will then increase to 12.5% for six months to 31 March 2021, before returning to 20%. VAT registration and deregistration thresholds will remain at current levels from 1 April 2022 for 2 years. Extended Loss Carry Back for businesses rates will be extended from one to three years for both sole traders and limited companies, applying to losses in 2020-21 and 2021-22.
As widely anticipated, corporation tax is to increase from April 2023 to 25% on profits over £250,000 but the rate for smaller profits under £50,000 remains at 19% and there will be relief for businesses with profits over £50,000 but under £250,000, giving some breathing space for those firms who are facing a longer recovery.
On personal tax, the inheritance tax nil rate and residence nil rate will remain static until 2026, though personal tax allowance and higher rate threshold will rise in line with consumer price inflation (CPI) to £12,750 from April 2021 and the HRT to £50,270. However these will remain unchanged until April 2026. National Insurance contributions will also rise with CPI to £9,568 and £50,270 for upper profit levels and will remain in place again until April 2026.
Capital gains tax exemption level is maintained at its current level to April 2026 with the individual being £12,300 and trust being £6,150.
With Pensions and savings tax, the pension lifetime allowance stays at £1,073,100 until April 2026, which will significantly impact some higher earners, and starting rate for savings remains at 0% of £5,000 for 2021-2022. ISA investment limits are unchanged at £20,000 per annum, junior ISA’s and child trust funds remain at £9,000.
Covid-19 fraud & tax evasion
With regards to combatting COVID-19 fraud, the Government has invested over £100 million in a taxpayer protection taskforce of 1,265 HMRC staff who will specifically target businesses who have used COVID-19 support packages, including CJRS and SEISS. This is in line with enforcement action to deter fraud amongst the seemingly increasing number of online scams and significantly strengthen the law enforcement to bounce back loans.
Within the Buy-to -let sector, HMRC has ongoing initiatives to target the buy to let sector for landlords who have not declared their income. This includes Airbnb who struck a deal with HMRC and informed them of 225,000 UK citizens and their income from lettings. Initially this was for the 2017-18 and 2018-19 tax years. It is known that Airbnb is not the first organisation to share details about its customers and HMRC’s connect system “the snooper computer” collects data from a wide variety of sources including personal social media pages.
As the UK moves forward as a nation, with the Covid vaccine programme gathering pace, there is without doubt an air of optimism not previously seen since the pandemic began. How the country’s economy will recover, and at what speed is yet to be seen, and it would be naïve to dismiss the prospects of future tax rises that may be needed to assist in repaying the colossal amount borrowed to bring the UK to where it is now. In the meantime, it is business as “the new” usual, as companies large and small, emerge to reclaim their position and move forward into what we hope will become the post covid era.
If you need any advice or assistance with regards your company’s accounts and finances then please get in touch with us at Hammond Barr.