News - Budget
5 March 2021
On 3rd March Chancellor Rishi Sunak delivered his 2021 Spring Budget. We go into further detail below the key announcements which include COVID-19 support announcements and tax changes.
Coronavirus Job Retention Scheme – Furlough
The furlough scheme has been extended and will be gradually phased out at the end of September 2021. For employees, up until the end of June they will receive 80% for hours not worked from the Government.
From 1 July 2021, the level of grant will be reduced, and employers will be asked to contribute towards the cost of their furloughed employees’ wages. To be eligible for the grant employers must continue to pay their furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
From July the Government’s contribution for hours not worked will be 70% up to £2,187.50 and the employer’s contribution for hours not worked will be 10% up to £312.50. The employer continues to make employers national insurance and pension contributions. The employee receives 80% up to £2,500 per month for hours not worked.
For August and September, the Government’s contribution for hours not worked will be 60% up to £1,875 and the employer’s contribution for hours not worked will be 20% up to £625. The employer continues to make employers national insurance and pension contributions. The employee receives 80% up to £2,500 per month for hours not worked.
Employers can continue to choose to top up their employees’ wages above the 80% total and £2,500 cap for the hours not worked at their own expense.
Self Employed Income Support Scheme (SEISS)
The Chancellor confirmed there would be a further two SEISS grants available up until September 2021.
The eligibility criteria for support under the SEISS remains unchanged, however, self-employed individuals who were previously ineligible for financial support under the first 3 Grants, as a result of not having filed tax returns for the 2018/2019 period, will now be eligible for Grants 4 and 5, providing they have filed a tax return for financial year 2019/20 by 28 February 2021.
The fourth SEISS grant will be available to claim from April. This will be calculated in the same way as the previous grants at 80% of three months’ average trading profits up to a maximum of £7,500.
The fifth SEISS grant covering months May to September 2021, will be available to be claimed from July 2021. The amount of this final grant will be determined by how much an individual’s turnover has been reduced in the year to April 2021 and will be either:
Further details of the fifth grant will be announced in due course.
A reminder that grants under the SEISS are treated as income and are therefore subject to tax.
From April 2021 there will be restart grants available to businesses in England who have been forced to close as a result of the pandemic.
Non-essential businesses reopening in April can claim up to £6,000 per premises.
For businesses in the hospitality, accommodation, leisure, personal care and gymnasium sector they will be able to claim up to £18,000 following the longer period of time they have had to close for.
New recovery loan scheme
The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes (Bounce Back Loans and Coronavirus Business Investment Loan Scheme) close.
The finance can be used for any legitimate business purpose, including growth and investment.
The government guarantees 80% of the finance to the lender, similar to the previous schemes, to ensure they continue to have the confidence to lend to businesses.
The scheme launches on 6 April and is open until 31 December, subject to Government’s review. Similar to the previous schemes, the loans will be available through a network of accredited lenders, whose names will be made public in due course.
There are two types of financing available
No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
You will be able to apply for a loan if your business:
You will need to show that your business:
Businesses that have received support under the existing COVID-19 guaranteed loan schemes will still be eligible to access finance under this scheme, if they meet all other eligibility criteria.
Businesses from any sector will be eligible to apply, except:
Business rates holiday extended
The business rates holiday in England has been extended by an additional three months until June 2021. This means that businesses in retail, hospitality and leisure properties in England will pay no business rates for three months from 1 April when combined with Small Business Rates Relief, with further relief available for the rest of the year.
VAT cut for hospitality and leisure companies
The VAT rate reduction to 5% for hospitality, accommodation and attractions introduced last summer will remain in place for a further 6 months until the end of September 2021.
From 1st October 2021 there will be an interim rate of 12.5% before returning to the standard from April 2022.
It has also been announced that the VAT registration (£85,000) and deregistration (£83,000) thresholds will not change for a further two years from 1 April 2022.
Stamp duty holiday
Stamp duty holiday extended until 30th June, when it will reduce to £250k until the end of September. The usual rate of £125k returns from 1st October 2021.
Personal tax thresholds
The personal tax threshold has been frozen from April 2021 when it will increase to £12,570 and remain at that level until April 2026. The higher rate threshold has also been frozen, it will increase in April 2021 to £50,270 and remain at that level until April 2026.
IHT (Inheritance Tax), VAT, pension thresholds and CGT (Capital Gains Tax) annual exemption will all remain the same.
From April 2023 Corporation Tax will increase to 25%. For companies with profits of £50k and under they will continue to be taxed at 19%. There will be tapered rates for profits above £50k up to £250k. Profits above £250k will be charged at the full 25%.
Temporary extension to loss carry back rules
To further support businesses the government is allowing businesses to carry back losses against trading profits of up to £2m for 3 years. This means companies can claim additional tax refunds of a maximum of £760k.
Super Deduction Tax Relief
For the next two years, companies can reduce their tax bill with Super Deduction of 130% of the costs for Business Investment.
The new temporary tax relief on qualifying capital asset investment, will cut a companies’ tax bill by 25p for every £1 invested in new equipment meaning they can reduce their taxable profits by 130% of the cost. This makes the UK capital allowances regime one of the World’s most competitive.
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
Liverpool City Region declared a Freeport
The Chancellor confirmed that together with seven other areas in the UK, Liverpool City Region will be declared a ‘Freeport’. Being declared a Freeport brings with it tax advantages including enhanced SDLT (Stamp Duty Land Tax) relief when purchasing qualifying land and buildings, Capital Allowances for plant and machinery, subject to qualifying criteria, Enhanced Structure and Buildings Allowances, Business Rates Relief and Employer National Insurance Contributions rates relief. We will provide further details once known.
Help to Grow scheme
The Budget also coincides with the publication of the government’s new Build Back Better: their strategy which they hope will drive the UK economy.
130,000 small and medium sized businesses will be supported through the new Help to Grow scheme, providing the digital and management tools needed to innovate, grow and help drive recovery.
The Government will provide subsidised support to businesses in the form of a 12 week ‘Help to Grow Management’ scheme, and ‘Help to Grow Digital’ scheme. This includes the provision of a business mentor, tuition delivered by business schools and money off vouchers to part fund the cost of new software.
For further details, including the eligibility criteria and to register for the Help to Grow scheme please visit www.gov.uk/helptogrow
The Chancellor announced an extension to the apprenticeship hiring incentive in England to September 2021. It was also announced that the incentive payment would increase from £1,000 to £3,000.
A new Flexi-job apprenticeship programme has been announced in England, that will enable apprentices to work with a number of employers in one sector.
A further £126 million investment was announced to provide an additional 40,000 traineeships in England with high quality work placements and training for 16-24 year olds in 2021/22 academic year.
Culture, Arts & Sport boost
The Chancellor confirmed an extension to the Culture Recovery Fund with an additional £300 million in funding. Whilst also extending the TV & Film restart scheme.
Research & Development Relief Capped
The amount of which an SME can reclaim Research & Development tax relief can receive in any one year has been capped at £20,000 (plus three times the company’s total PAYE and NICs liability).
Statutory Sick Pay
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government for Covid.
Home buyers support
From April 2021, support for homebuyers in the form of a new mortgage guarantee scheme will enable all UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.
Freeze on fuel duty continues.
Freeze on alcohol duty continues.
Universal credit uplift of £20 per week to remain in situ until end of September/further 6 months.
Working tax credit payments continue for 6 months with a one-off payment of £500.
Limit for contactless payment to rise to £100.