At the time of the last Budget the Chancellor could not have expected the Coronavirus crisis to be going on still and it feels like he has has had monthly mini Budgets ever since. The Budget 2021 did not surprise with continued support for the economy and an expected increase in corporation tax:

Covid support for business continues – the give:

  • Furlough is being extended from the current end date of April until September as released pre-Budget 2021. It continues at the 80% level for May and June, then employers need to contribute 10% in July and 20% in August and September (government support presumably dropping to 70% then 60% if based on the employees full pay)
  • For the self employed the 4th grant will be at the 80% level and a 5th one to be claimed from July will be at 80% if turnover has fallen by more than 30% and only 30% if turnover has fallen by less than that
  • Those newly self employed who have filed their tax return for 2020 may claim the 4th and 5th grant – this affects 600k more people
  • The business rates holiday has been extended to 30 June, with a 2/3 reduction to the end of March 2022
  • VAT for the hospitality and tourism industry remains at 5% until 30 September then 12.5% until the end of the ta year when it reverts to 20%
  • The stamp duty increased £500k band is being extended to the end of June, then an interim £250k to the end of September
  • A government backed mortgage guarantee is being introduced for those with only a 5% deposit to change “generation rent to generation buy” – supported by an increasing number of lenders
  • As the Bounce Back and CBIL schemes come to an end a new Recover Loan scheme is being introduced to the end of the year, once again with an 80% government guarantee

How it’s going to be paid for in taxes – the take:

  • Income tax, NI and VAT rates will not increase
  • Personal tax free allowances and higher rate threshold will increase next year as published (£12,570 / £50,270) but then being held until April 2026, effectively taxing by the back door
  • There will be no changes to Inheritance tax, Capital Gains Tax (CGT), VAT and pension lifetime allowance thresholds or rates
  • There was an expectation that CGT rates would come more in line with income tax rates but perhaps that will change in the future?
  • The main change was corporation tax where the headline rate will increase to 25% from April 2023
  • Small businesses with profits under £50k will continue to pay 19% with a tapered rate to £500k profits
  • Business losses upto £2m may be carried back 3 years rather than the usual 1 year for 2020/21 and 2021/22 – both for incorporated and unincorporated businesses

Other incentives and no-change policies:

  • To encourage businesses to invest and release some of their cash reserves a super deduction of 130% first year capital allowance will be available from 1 April 2021 to 31 March 2023
  • Planned increases in alcohol and fuel duty from April have been cancelled
  • There were quite a few incentives for the regions including establishing an Infrastructure bank in Leeds, investments in ports used for windfarms and 8 freeports announced across the country
  • Schemes for small businesses aimed at management training and increased digital skills
  • To encourage high growth innovative companies, special Visa requirements aimed to bring in the best talent from around the world

With a massive public debt it seems likely there will be further increases in taxes in future years, but there is little change for the next year or so. As usual the Budget 2021 detail will be released over the next few weeks and you should seek professional advice before taking any steps based on these contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Shrewsbury, Shropshire – Accountants who “speak your language”