Largely as expected, Chancellor Rishi Sunak’s budget focused on the Government’s plans to offer financial support in dealing with the Coronavirus pandemic along with their recovery proposal for the future, with various schemes proposed to encourage spending to inject funds and boost the economy. For a general overview of all budget matters, the BBC’s summary here is as good as any.
As always, we’ll focus on the tax related announcements most likely to be of relevance to our typical client. You can find our suggestions for tax efficient salary/dividend choices for 2021-22 (i.e. from 6 April 2021 onwards) here.
No announcements as of yet, with the planned changes to off-payroll working rules expected to still come in from 6 April 2021. This is expected to be clarified on 23 March. Our guidance on the upcoming IR35 changes can be found here.
From 6 April, the tax-free personal allowance is set to increase to £12,570 (2020-21 £12,500),
with the basic rate band applying to the next £37,700 (2020-21 £35,500), further increasing the basic rate band to be £50,270 (2020-21 £50,000).
These rates are due to remain the same for five years until April 2026.
No change for the upcoming two financial years.
Announced to rise to 25% from April 2023 for companies with profits in excess of £250,000. Companies with profits of £50,000 or less will still pay Corporation Tax at 19%, with the rate set to be tapered for those in between. Of course, two years is a long way off and so these plans may well change.
– Super Deductions
From 1 April 2021, companies will be able to claim a 130% super deduction capital allowance on qualifying plant and machinery assets. Please note, at time of writing the conditions on these have not been made public and as always, the devil is in the detail so we’re unable to advise further on this just yet. However, it seems general intention will be to reduce the risk of companies deferring big investments until 2023 to save 25% CT instead of 19% CT.
CAPITAL GAINS TAX
The Capital Gains Tax annual exemption is due to remain at its current level of £12,300 until April 2026. This will be relevant for those looking to close their company and withdraw funds at this point, as well as for anyone disposing of an asset (such as shares, properties, cryptocurrencies, etc.) and making a capital gain. Effectively, the first £12,300 of chargeable gains in a tax year will be tax free.
At this point, no announcements have been made regarding the CGT rates themselves for the 21/22 tax year and so are expected to remain at their current levels.
Temporary extension of the 5% reduced rate for goods and services supplied by the tourism and hospitality sector until 30 September 2021, increasing to 12.5% until 31 March 2022, before returning to 20%.
In short, you’ll need to double check the VAT rate charged on receipts for things like having a meal while working away from your normal workplace. We’re hoping FreeAgent will be able to tweak the auto-VAT setting on a temporary basis to relieve this headache!
The furlough scheme has been extended until the end of September 2021 where you have been unable to work due to COVID. HMRC will cover 80% of employees’ wages until June, dropping to 70% in July, and 60% in August and September.
For sole traders and partnerships (not limited companies), the SEISS grants will also be extended until September 2021.
The new Recovery Loan Scheme will be available from 6 April until December. Similar to previous support loans, the government will guarantee 80% to the lender. More information can be found here.
We’ve highlighted some of the other points which may be of interest below, but please appreciate these are largely outside the scope of our services to advise on.
– Stamp Duty Holiday – £500,000 starting rate extended until 30 June, reducing to £250,000 until 30 September, returning to £125,000 from 1 October.
– New Mortgage Guarantee Scheme – a government guarantee to lenders may allow first-time buyers to benefit from only requiring a deposit of 5% of the loan, on properties worth up to £600,000.
– Duties on alcohol and fuel to be frozen for a further year.
– Contactless limit increasing to £100.
– 2030 Men’s Football World Cup Bid – Football is attempting to come home with a bid for the UK to jointly host the 2030 world cup with Ireland.