Budget Update 2021 - ChadSan
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Budget Update 2021 Support for businesses Business Tax Changes VAT Changes for Individuals Other news Support for businesses The furlough scheme, due to end on 30 April 2021, has been extended for a further 5 months to 30 September 2021. There will be no change for employees, who will continue to receive 80% of their usual pay for hours not worked. From July, employers will be required to contribute towards the cost of hours not worked – 10% in July (up to £312.50 per employee) and 20% in August and September (up to £625 per employee). Apprenticeship Payments Employers who hire a new apprentice between 1 April and 30 September 2021 will receive £3,000 per new hire, as opposed to the previous scheme which paid £2,000 per young apprentice and £1,500 for apprentices aged 25 and over. Extension to the Coronavirus Job Retention Scheme The 4th SEISS grant will cover the period February to April 2021 and will be 80% of three months’ average trading profits, capped at £7,500 in total. Claims will be able to be made by eligible individuals from late April provided that they have filed their 2019/20 self-assessment tax return. This will mean that more individuals may now be eligible based on their 2019/20 tax returns. A 5th SEISS grant was announced which will be claimed from late July, but this will be determined by a turnover test: Self Employment Income Support Scheme (SEISS) If turnover has fallen by 30% or more, the grant will be 80% of three months’ average trading profits, capped at £7,500 in total; If turnover has fallen by less than 30%, the grant will be 30% of three months’ average trading profits, capped at £2,850 in total. From 1 April 2021, the current twice-weekly grant payments for closed businesses under the Local Restrictions Support Grants will end. They will be replaced by a one-off “Restart Grant” designed to help support businesses in the final stages before reopening. Non-essential retail businesses will receive a grant of up to £6,000 per property and businesses in the hospitality and leisure industries will receive a grant of up to £18,000 per premises. These grants will be distributed by the local authorities and will be assessed according to the same criteria as previous grants. Restart grants The previous loan schemes (Bounce Back Loan Scheme [BBLS] and Coronavirus Business Interruption Loan Scheme [CBILS]) will close to applications from 31 March 2021. From 6 April 2021 a new loan scheme will launch called the Recovery Loan Scheme (RLS). The RLS can provide term loans and overdrafts between £25,001 and £10 million or invoice and asset finance between £1,000 and £10 million. Term loans and asset finance facilities are available for terms of up to 6 years and overdrafts and invoice financing facilities are available for terms of up to 3 years. The eligibility criteria for the RLS are broadly the same as previous schemes: Recovery Loan Scheme The business is trading in the UK The business is viable or would be viable were it not for the pandemic The business has been impacted by the coronavirus pandemic The business is not in collective insolvency proceedings Businesses who had previously received support either from the BBLS or CBILS will still be able to apply for the RLS. Unlike the BBLS and CBILS, there is no interest-free period or capital repayment holiday. Loans will be provided on commercial terms, but the government is still providing an 80% guarantee to the lenders to provide them with greater confidence to lend to businesses. The current 100% discount on business rates for businesses in the retail, hospitality and leisure sectors will be extended for 3 months until 30 June 2021. From 1 July 2021 to 31 March 2022, this discount will reduce to 66%. Eligible businesses should automatically receive this discount on their rates bill but if it is not applied then you will need to contact your local authority to request a revised bill. Business rates holiday Statutory Sick Pay Small employers (businesses with <250 employees) will, for now, continue to be entitled to reclaim Statutory Sick Pay for 14 days (2 weeks including weekends) for each employee who has taken sick leave due to COVID-19. Business Tax changes Corporation Tax rate increase From 1 April 2023 the rate of Corporation Tax will be increasing to 25%. However, the rate will be tapered to the size of the business, which will be measured on the level of profits: Businesses with profits of £50k or less will be protected and the Corporation Tax rate will remain at 19% Businesses with profits between £50k and £250k will benefit from a tapered rate, up to the maximum rate of 25%. Extended loss carry backs for businesses The Government will extend the normal carry back period for trading losses from 1 year to 3 years, for both companies and self-employed individuals/sole traders. Sole traders and standalone companies will be able to carry back up to £2 million of losses Companies which are part of a group of companies will have an overall cap of £2 million of losses for the whole group, but will be able to carry back up to £200,000 of losses each with no restrictions. Super-deduction for investment From 1 April 2021 until 31 March 2023, businesses that invest in qualifying plant and machinery assets will be able to claim a 130% “super-deduction” capital allowance to reduce their tax bill and a 50% first-year allowance for qualifying special rate assets. For example, a company investing in new plant that had a cost of £10,000 will now be able to deduct £13,000 for Corporation Tax purposes. R&D tax relief As previously announced, for periods beginning on/after 1 April 2021, R&D payable tax credits for SMEs will be capped at £20,000 plus three times the company’s total PAYE and NICs liability. The government has also launched a consultation, closing on 2 June 2021, on R&D tax reliefs and whether these are still fit for purpose. VAT The temporary 5% VAT rate for the tourism and hospitality sector will be extended until 30 September 2021. After 30 September, an interim VAT rate of 12.5% will apply for the following 6 months to 31 March 2022. The VAT registration threshold will be frozen at the existing level (£85,000) until 1 April 2024. Extension to the 5% rate for tourism and hospitality Changes for individuals Income Tax: the tax-free personal allowance is increasing with inflation as planned for the 2021/22 tax year, to £12,570, and the higher rate threshold will rise as planned to £50,270. These will take effect from April 2021 and will remain frozen until April 2026. This higher rate threshold will still apply to savings and dividend income. The government has pledged not to increase the rates of income tax. National Insurance contributions (NICs) thresholds will also rise with inflation, meaning that the primary threshold increases from £9,500 to £9,568, and the upper earnings limit increases in line with income tax thresholds to £50,270. For employers, the secondary threshold is rising from £8,788 to £8,840. For any workplace pension scheme contributions, the increased higher rate threshold has an impact on ‘qualifying earnings’, the band of earnings on which you contribute to your pension scheme, meaning if you are a higher rate taxpayer or above you will contribute slightly more from your salary. Other NICs thresholds (for Class 2 and Class 4 contributions) will be evaluated in the future – possibly in the Autumn budget this year. The inheritance tax thresholds and the Annual Exempt Amount for Capital Gains Tax will be maintained at existing levels until April 2026. There are also no changes to the Pensions Lifetime Allowance or the starting tax rate for savings. Personal taxes and National Insurance The Stamp Duty Land Tax (SDLT) holiday will continue until 30 June 2021 on residential properties below £500,000. From 1 July 2021 to 30 September 2021, the SDLT nil rate band will then be temporarily reduced to £250,000. Finally, from 1 October 2021 the SDLT nil rate band will reduce back to its pre-COVID level of £125,000 (£150,000 for non-residential properties). If you are a first-time buyer, you will still be entitled to the stamp duty relief on purchase prices below £300,000. Stamp Duty Land Tax A new mortgage guarantee scheme will come in from April 2021 (and finish in December 2022) which will allow buyers to put down a 5% deposit, with the government giving lenders a guarantee down to 80% of the purchase value (homes valued up to £600,000). Mortgage eligibility assessments will remain the same with regards to credit scoring etc. and buyers will be able to fix their mortgage interest rate for up to 5 years. The scheme will be open to all regulated lenders and it was announced that Lloyds, NatWest, Santander, Barclays and HSBC will be offering 95% mortgages from April. Mortgage guarantee scheme Other news Future Fund: Breakthrough Following on from the Future Fund, Future Fund: Breakthrough will be launched to support the most innovative, R&D-intensive businesses. The Government will commit £375 million and the British Business Bank will take equity in funding rounds of over £20 million led by private investors. The government is launching a scheme to help small and medium sized business across the UK in their two new programmes, Help to Grow: Management and Help to Grow: Digital. From June, Help to Grow: Management will be open to small businesses. The 12-week programme will be delivered by leading business schools across the UK, and will combine a practical curriculum with 1:1 support from a business mentor. The programme is designed to help small business leaders develop their strategic skills and develop a tailored business growth plan. For this reason the participants must be a member of the senior management team within the business. 30,000 places will be available over 3 years and the programme will be 90% subsidised by the government, meaning the cost to participants is £750. From the autumn, Help to Grow: Digital will offer free advice to small businesses on how technology can boost their performance through a new online platform. Eligible businesses will also be able to get a discount of up to 50% on the costs of approved software, worth up to £5,000. The purpose of the software should be to make the most of selling online by building customer relationships and increasing sales. There are certain eligibility criteria for who can receive the voucher, and full details will be published in the summer. Help to Grow schemes If you would like further information please give Rachel Dale a call on 01483 802895 or email her on [email protected]. 1
Transcript of Budget Update 2021 - ChadSan
Budget Update 2021
Support for businesses
Business Tax Changes VAT Changes for
Individuals Other news
Support for businesses
The furlough scheme, due to end on 30 April 2021, has been extended for a further 5 months to 30 September 2021. There will be no change for employees, who will continue to receive 80% of their usual pay for hours not worked. From July, employers will be required to contribute towards the cost of hours not worked – 10% in July (up to £312.50 per employee) and 20% in August and September (up to £625 per employee).
Apprenticeship Payments
Employers who hire a new apprentice between 1 April and 30 September 2021 will receive £3,000 per new hire, as opposed to the previous scheme which paid £2,000 per young apprentice and £1,500 for apprentices aged 25 and over.
Extension to the Coronavirus Job Retention Scheme
The 4th SEISS grant will cover the period February to April 2021 and will be 80% of three months’ average trading profits, capped at £7,500 in total. Claims will be able to be made by eligible individuals from late April provided that they have filed their 2019/20 self-assessment tax return. This will mean that more individuals may now be eligible based on their 2019/20 tax returns. A 5th SEISS grant was announced which will be claimed from late July, but this will be determined by a turnover test:
Self Employment Income Support Scheme (SEISS)
If turnover has fallen by 30% or more, the grant will be 80% of three months’ average trading profits, capped at £7,500 in total; If turnover has fallen by less than 30%, the grant will be 30% of three months’ average trading profits, capped at £2,850 in total.
From 1 April 2021, the current twice-weekly grant payments for closed businesses under the Local Restrictions Support Grants will end. They will be replaced by a one-off “Restart Grant” designed to help support businesses in the final stages before reopening. Non-essential retail businesses will receive a grant of up to £6,000 per property and businesses in the hospitality and leisure industries will receive a grant of up to £18,000 per premises. These grants will be distributed by the local authorities and will be assessed according to the same criteria as previous grants.
Restart grants
The previous loan schemes (Bounce Back Loan Scheme [BBLS] and Coronavirus Business Interruption Loan Scheme [CBILS]) will close to applications from 31 March 2021. From 6 April 2021 a new loan scheme will launch called the Recovery Loan Scheme (RLS). The RLS can provide term loans and overdrafts between £25,001 and £10 million or invoice and asset finance between £1,000 and £10 million. Term loans and asset finance facilities are available for terms of up to 6 years and overdrafts and invoice financing facilities are available for terms of up to 3 years. The eligibility criteria for the RLS are broadly the same as previous schemes:
Recovery Loan Scheme
The business is trading in the UKThe business is viable or would be viable were it not for the pandemicThe business has been impacted by the coronavirus pandemicThe business is not in collective insolvency proceedings
Businesses who had previously received support either from the BBLS or CBILS will still be able to apply for the RLS. Unlike the BBLS and CBILS, there is no interest-free period or capital repayment holiday. Loans will be provided on commercial terms, but the government is still providing an 80% guarantee to the lenders to provide them with greater confidence to lend to businesses.
The current 100% discount on business rates for businesses in the retail, hospitality and leisure sectors will be extended for 3 months until 30 June 2021. From 1 July 2021 to 31 March 2022, this discount will reduce to 66%. Eligible businesses should automatically receive this discount on their rates bill but if it is not applied then you will need to contact your local authority to request a revised bill.
Business rates holiday
Statutory Sick Pay
Small employers (businesses with <250 employees) will, for now, continue to be entitled to reclaim Statutory Sick Pay for 14 days (2 weeks including weekends) for each employee who has taken sick leave due to COVID-19.
Business Tax changes
Corporation Tax rate increase
From 1 April 2023 the rate of Corporation Tax will be increasing to 25%. However, the rate will be tapered to the size of the business, which will be measured on the level of profits:
Businesses with profits of £50k or less will be protected and the Corporation Tax rate will remain at 19% Businesses with profits between £50k and £250k will benefit from a tapered rate, up to the maximum rate of 25%.
Extended loss carry backs for businesses
The Government will extend the normal carry back period for trading losses from 1 year to 3 years, for both companies and self-employed individuals/sole traders. Sole traders and standalone companies will be able to carry back up to £2 million of losses Companies which are part of a group of companies will have an overall cap of £2 million of losses for the whole group, but will be able to carry back up to £200,000 of losses each with no restrictions.
Super-deduction for investment
From 1 April 2021 until 31 March 2023, businesses that invest in qualifying plant and machinery assets will be able to claim a 130% “super-deduction” capital allowance to reduce their tax bill and a 50% first-year allowance for qualifying special rate assets. For example, a company investing in new plant that had a cost of £10,000 will now be able to deduct £13,000 for Corporation Tax purposes.
R&D tax relief
As previously announced, for periods beginning on/after 1 April 2021, R&D payable tax credits for SMEs will be capped at £20,000 plus three times the company’s total PAYE and NICs liability. The government has also launched a consultation, closing on 2 June 2021, on R&D tax reliefs and whether these are still fit for purpose.
VAT
The temporary 5% VAT rate for the tourism and hospitality sector will be extended until 30 September 2021. After 30 September, an interim VAT rate of 12.5% will apply for the following 6 months to 31 March 2022. The VAT registration threshold will be frozen at the existing level (£85,000) until 1 April 2024.
Extension to the 5% rate for tourism and hospitality
Changes for individuals
Income Tax: the tax-free personal allowance is increasing with inflation as planned for the 2021/22 tax year, to £12,570, and the higher rate threshold will rise as planned to £50,270. These will take effect from April 2021 and will remain frozen until April 2026. This higher rate threshold will still apply to savings and dividend income. The government has pledged not to increase the rates of income tax. National Insurance contributions (NICs) thresholds will also rise with inflation, meaning that the primary threshold increases from £9,500 to £9,568, and the upper earnings limit increases in line with income tax thresholds to £50,270. For employers, the secondary threshold is rising from £8,788 to £8,840. For any workplace pension scheme contributions, the increased higher rate threshold has an impact on ‘qualifying earnings’, the band of earnings on which you contribute to your pension scheme, meaning if you are a higher rate taxpayer or above you will contribute slightly more from your salary. Other NICs thresholds (for Class 2 and Class 4 contributions) will be evaluated in the future – possibly in the Autumn budget this year. The inheritance tax thresholds and the Annual Exempt Amount for Capital Gains Tax will be maintained at existing levels until April 2026. There are also no changes to the Pensions Lifetime Allowance or the starting tax rate for savings.
Personal taxes and National Insurance
The Stamp Duty Land Tax (SDLT) holiday will continue until 30 June 2021 on residential properties below £500,000. From 1 July 2021 to 30 September 2021, the SDLT nil rate band will then be temporarily reduced to £250,000. Finally, from 1 October 2021 the SDLT nil rate band will reduce back to its pre-COVID level of £125,000 (£150,000 for non-residential properties). If you are a first-time buyer, you will still be entitled to the stamp duty relief on purchase prices below £300,000.
Stamp Duty Land Tax
A new mortgage guarantee scheme will come in from April 2021 (and finish in December 2022) which will allow buyers to put down a 5% deposit, with the government giving lenders a guarantee down to 80% of the purchase value (homes valued up to £600,000). Mortgage eligibility assessments will remain the same with regards to credit scoring etc. and buyers will be able to fix their mortgage interest rate for up to 5 years. The scheme will be open to all regulated lenders and it was announced that Lloyds, NatWest, Santander, Barclays and HSBC will be offering 95% mortgages from April.
Mortgage guarantee scheme
Other news
Future Fund: Breakthrough
Following on from the Future Fund, Future Fund: Breakthrough will be launched to support the most innovative, R&D-intensive businesses. The Government will commit £375 million and the British Business Bank will take equity in funding rounds of over £20 million led by private investors.
The government is launching a scheme to help small and medium sized business across the UK in their two new programmes, Help to Grow: Management and Help to Grow: Digital. From June, Help to Grow: Management will be open to small businesses. The 12-week programme will be delivered by leading business schools across the UK, and will combine a practical curriculum with 1:1 support from a business mentor. The programme is designed to help small business leaders develop their strategic skills and develop a tailored business growth plan. For this reason the participants must be a member of the senior management team within the business. 30,000 places will be available over 3 years and the programme will be 90% subsidised by the government, meaning the cost to participants is £750. From the autumn, Help to Grow: Digital will offer free advice to small businesses on how technology can boost their performance through a new online platform. Eligible businesses will also be able to get a discount of up to 50% on the costs of approved software, worth up to £5,000. The purpose of the software should be to make the most of selling online by building customer relationships and increasing sales. There are certain eligibility criteria for who can receive the voucher, and full details will be published in the summer.
Help to Grow schemes
01483 802 892 www.chadsan.com [email protected]
If you would like further information please give Rachel Dale a call on 01483 802895 or email her on [email protected].
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