The beginning of March 2021, Rishi Sunak presented his second budget, which as always was received with mixed emotions. We wanted to set out some of the continued covid support and key tax changes below, this is not a full list and you can access a copy of the budget report as linked below, but highlights some of the announcements that you may need to look into further.
Furlough scheme will be extended until September 2021, with employers contributing from July 2021.
The Government confirmed that the fourth SEISS grant will be worth 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500 in total. It will cover the period from February to April 2021 and can be claimed from late April. To qualify, Self Employed individuals must have filed a 2019/20 tax return through self-assessment by midnight on 2 March 2021. A “fifth and final” SEISS grant will cover May to September 2021. Those whose turnover has fallen by 30% or more will receive the full grant worth 80%, capped at £7,500. Those whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. The final grant can be claimed from late July.
Extended VAT discount for hospitality – The current reduction of the VAT rate for the hospitality sector, holiday providers and attractions of 5% will be extended by six months to 30 September 2021. A new 12.5% rate will apply between 1 October 2021 and 31
March 2022. This intermediate rate is to grad-ually move these businesses back to the stand-ard rate of VAT on their supplies.
Deferred VAT payments – At the begin-ning of Covid there was the option to defer VAT on returns between March and June 2020. Originally, this VAT was due to be paid back by 31 March 2021, but businesses will now be able to spread the payment of this VAT over a maximum of 11 monthly payments. (note -the business itself must apply to spread the cost and it cannot be done by an accountant or adviser)
Corporation tax – The main rate of corp-oration tax will remain at 19% for the financial years beginning 1 April 2021 and 1 April 2022. From 1 April 2023, the main rate will increase to 25% on profits over £250,000. A small profits rate will be introduced for companies with profits of £50,000 or less, which will continue to be charged at 19%. It will not be available to close investment-holding companies. Companies with profits between £50,000 and £250,000 will pay tax at the main rate, but this will be reduced by a marginal relief creating a tapered corporation tax rate.
Super deduction – From 1 April 2021 until 31 March 2023, companies investing in new qualifying plant and machinery will benefit from a 130% first-year capital allowance. Additionally, a 50% first-year capital allowance will be available for qualifying special-rate assets. (Certain exclusions will apply)
Corporation tax loss relief – The corp-oration tax trading loss carry-back rule will be temporarily extended from the existing one year to three years. This measure will cover company accounting periods ending in the period 1 April 2020 to 31 March 2022.
Rates and allowances – In 2021/22 the tax-free personal allowance will increase to £12,570, the basic-rate band will increase to £37,700 and the higher-rate threshold will increase to £50,270. The additional-rate band will remain at £150,000. Personal tax thresholds will be frozen until 2025/26.
National living wage – From April 2021 the national living wage now applicable to over-23s increases by 2.2% from £8.72 an hour to £8.91 an hour.
Trading losses – For trading losses made in 2020/21 and 2021/22, you will be able to carry back for a period of three years, with losses being carried back against later years first. Some further restrictions apply. (Currently they could only be carried back 1 year)
Marriage allowance – The transferable marriage allowance will increase from £1,250 to £1,260 for 2021/22.
If you wish to discuss how this budget will impact you and your business, please feel free to get in touch.
Allchurch & Co Chartered Accountants / www.allchurchco.com / 07825 232218