Budget 2021 — Key Points
- April 27, 2021
- Posted by: Best4business_Admin
- Category: News
The Chancellor Rishi Sunak revealed details of the 2021 Budget on 3rd March 2021 — it set out the government’s tax and spending plans for the coming year.
The UK economy shrank by 10% in 2020. However, growth of 4% is forecast in 2021, with a return to pre-Covid levels predicted by mid-2022.
Measures are naturally centred around support and recovery following the continued impact of the COVID-19 pandemic, with revamped plans aiming to protect businesses and jobs. Public finances are also set to be rebalanced through a series of tax-raising measures.
Furlough has been extended until the end of September, with the government continuing to contribute 80% of salary costs until July. Employers will be asked to provide 10% from July, and 20% from August. As before, the choice to top-up the remaining 20% is at the discretion of each employer.
Support for the self-employed is also extended; grants of 80% of average trading profits are available to cover the period up until the end of July. From August, the levels of grants offered will be dependent on current turnover. The eligibility criteria, requiring submission of a 2019/20 personal tax return, will mean around 600,000 more people will be able to access the grant.
The government also announced an increase in the National Living Wage to £8.91 from April, a £20 weekly uplift to universal credit, and a one-off payment of £500 to Tax Credit claimants.
Corporation Tax will increase significantly to 25% from 2023. However, a tapering mechanism means only businesses with profits greater than £250,000 will pay the higher rate. Businesses that generate profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed on net profits at 19%.
The rate of income tax, national insurance and VAT is set to remain, with the tax-free personal threshold increased to £12,570 and higher rate increased to £50,270. These will now, however, be frozen until 2026.
Elsewhere, the stamp duty holiday in England and Northern Ireland is extended until June, with no tax applied on sales below £500,000. Inheritance tax thresholds, personal life-time allowances, and annual capital gains tax exemptions thresholds are likewise frozen until 2026.
Business Support and Investment
A new Recovery Loan Scheme is being launched to replace existing support, offering loans between £25,000 and £10 million. The Restart Grant scheme pledges £5 billion of grants to shops and other businesses who have faced closure during the pandemic.
Tax breaks have been declared to allow companies investing in new assets to offset some costs against taxable profits at an enhanced rate of 130%; this may be intended to both stimulate investment, and as a countermeasure to the corporation tax increase.
There is also increased financial support to incentivise companies to take on new apprentices.
The business rates holiday in England has been extended by a further three months and reduced VAT rates for the Tourism and Hospitality sector will also continue until 30 September 2021.
How We Can Help
The success of the vaccination roll-out programme brings about optimism that businesses will be able to recover quickly as the country emerges from the effects of coronavirus.
As a firm we have continuously adapted to all of the new legislation to provide invaluable support to our business and self-employed clients during the pandemic and are acutely aware of the individual nature of its impact.