AS THE ROLL out of the vaccine continues apace, UK Chancellor Rishi Sunak held back on the promised heavy taxation changes but instead opted for a light touch.
In today’s Shipleys Tax note we look at the highlights and what it means for you.
At a glance Budget 2021 announcements:
- Furlough extended until September 2021 and extra Self Employment Support grants made available with potentially more qualifying.
- Personal Allowance frozen for 5 years – this means that for tax years ended 5 April 2022 until 5 April 2026, you will be able to have an annual income of £12,570 before paying any tax, and you will be taxed at the higher 40% rate (32.5% for dividends) once your income exceeds £50,270. This will effectively push more and people into the higher tax rates as earnings increase.
- Corporation tax increase from 19% to 25% – the 25% rate will apply to companies whose profits are above £250,000. Where a company’s profits falls between £50,000 and £250,000, a (complex) tapering calculation will apply, thereby allowing companies to grow gradually without paying at the top rate.
- 2 Year “Super Tax Deduction” on business investments – a new “super deduction” of 130% of capital expenditure on new qualifying plant and machinery will apply from 1 April 2021 to 31 March 2023 (when the 25% rate of CT starts). The 130% deduction applies to business assets which would be eligible for the main capital allowances. Businesses which are able to invest heavily in plant and machinery within the next two years will benefit from the business tax cut before the increased corporation tax rate of 25% kicks in.
- Extension of losses being carried back against tax – many companies will have made losses during the Covid-19 pandemic, therefore relief is provided for loss-making business to carry back losses by up to 3 years for up to £2m of losses per group in each of the financial years 2020/21 and 2021/22. This £2m cap applies only to the extended carry back, so there is no change to the unlimited carry back of losses to the previous 12 month accounting period.
- Stamp Duty holiday extended – the current Stamp Duty nil rate band of £500,000 for residential property acquisitions in England and Northern Ireland will be extended from 31 March to 30 June 2021, with a reduced nil rate band of £250,000 for acquisitions between 1 July and 30 September, after which it will revert to £125,000.
- Restart grants – https://www.shipleystax.com/2021/03/restart-new-grants-for-small-businesses/
- VAT 5% extended for 6 months then 12.5% thereafter – an extension to the temporary 5% rate of VAT until 30 September 2021. A new reduced rate of VAT of 12.5% will then be introduced from 1 October 2021 until 31 March 2022 after which the standard rate of VAT (20%) will apply
- Freeports – eight new freeport sites have been announced. Expenditure within designated freeports will attract the following reliefs:
- Enhanced Structures and Building Allowances at 10% for buildings brought into use by 30 September 2026;
- 100% enhanced capital allowances for companies incurring qualifying expenditure on plant and machinery within Freeport sites until 30 September 2026.
If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.
Please note that Shipleys Tax do not give free advice by email or telephone.
