Details of the UK Budget have emerged that shed light on the finer changes that affect businesses and people, in the midst of a pandemic.
The Job Retention Scheme and the Self-Employed Income Support Scheme (SEISS) are just two fundamental programmes aimed at preserving jobs and saving businesses from going under.
UK BUDGET: SAVING JOBS AND BUSINESSES
Under the Coronavirus Job Retention Scheme employees will get 80% of their salary, for hours not worked, until the scheme ends.
Employers will be asked to contribute 10% towards wages for hours not worked from July 2021, rising to 20% in August and September 2021.
BUSINESSES GRAPPLE WITH THE EFFECTS OF COVID-19
The Coronavirus Job Retention Scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.
This move suggests that COVID-19 will be under control by later this year, and so the focus is on saving jobs, rather than putting more money into unemployment costs.
NEW BUSINESSES CAN NOW CLAIM FOR SEISS GRANTS
The Self-Employed Income Support Scheme (SEISS) has been criticised for not allowing businesses that started trading during 2019-20 to claim. The following changes have been made with the new UK budget:
- New businesses can claim for the fourth and fifth SEISS grants as long as their tax return for 2019-20 was filed by midnight 2 March 2021.
- For the fifth grant, claims can be made from July 2021.
- Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant.
- Those with decreases in turnover of less than 30% will be restricted to a 30% claim.
RESTART GRANTS FOR BUSINESSES FORCED TO CLOSE DOWN
£5bn of funding is being allocated for restart grants. They will support businesses obliged to close during much of lockdown. The grants will consist of:
- A one-off grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
- Non-essential retail that has tended to open first, can apply for a one-off £6,000 grant.
BUSINESS RATES HOLIDAY EXTENDED
The government will continue with the 100% business rates holiday according to the UK budget for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors.
For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.
Other special rates and exemptions include:
- Exemption for COVID-19 related home office expense extended until 5 April 2022.
- Exemption for reimbursement of antigen test costs
- A new Recovery Loan Scheme: Loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close.
REDUCED RATE OF VAT
The temporarily reduced rate of 5% for hospitality, holiday accommodation, and attractions will be extended until 30 September 2021. This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.
SUPPORT FOR THE UK HOUSING MARKET
The mortgage guarantee scheme will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.
WHAT YOU NEED TO KNOW
Mortgage guarantee scheme
The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.
Stamp duty holiday
The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021.
The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day.
A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland, is to be introduced from 1 April 2021.
HOW TAXATION CHANGES WILL AFFECT YOUR BUSINESS
Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include:
Income Tax 2021-22 to 2025-26
The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.
Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at higher rates if these increases breach the £37,700 annual basic rate limit.
Regional variations to Income Tax rates apply in Scotland and may apply in Wales.
NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.
Starting rate for savings
The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.
Lifetime Allowance for pension pots
From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.
Cycle to work scheme change
The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.
The change will have an effect on and after the Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.
Van benefits for zero carbon emissions
The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have an effect on and after 6 April 2021 according to the UK budget.
WHAT ABOUT CGT AND CORPORATE TAX?
Capital Gains Tax
Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax in the UK budget that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives, and some types of trusts for disabled people; and £6,150 for trustees of most settlements.
As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.
From 1 April 2023, there will be two rates of CT.
- Taxable profits up to £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
- Taxable profits in excess of £250,000 will be taxed at 25%
- Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods.
Carry back of trading losses
The present provisions that restrict the carryback of tax losses are being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.
This extension will apply to a maximum of £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.
The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have the capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.
R&D tax credit cap to be introduced
For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.
Enterprise Management Incentives
As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes.
The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022.
Major new investment reliefs
- A new “super-deduction” and a 50% first-year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment.
- The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred.
- Assets that qualify for the special rate relief will qualify for the 50% first-year allowance.
- The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021.
Tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and building allowances.
No changes in the present rates and allowances that are all frozen at current levels until April 2026.
There be no changes to the standard 20% rate.
The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.
- The recent increase in benefits of £20 per week is to be extended for a further six months.
- Working Tax Credit claimants will receive equivalent support via a £500 one off payment.
- There will be no increases in duty on alcoholic drinks or fuel.
- Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).
- Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.
ISA investment limits for 2021-22
The limits set for 2021-22 according to the UK budget are:
- Adult ISAs the limit remains at £20,000
- Junior ISA limit remains at £9,000
- Child Trust Funds remain unchanged at £9,000
National Living Wage increase
The NLW will increase to £8.91 per hour from 1 April 2021.
There will be a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.
Help to Grow schemes
Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost.
In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.
Single contactless payments
Our final comment on the UK Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.
Read our article on Striking companies from the companies register here.