For a quick overview of the key points from the Chancellor's Budget on 3 March 2021, here are the key takeaways.
4 March 2021
If you are short of time but want a quick overview of the implications from the Chancellor’s Budget on 3 March 2021, our specialist team have compiled a list of the key takeaways. For more detail and a comprehensive overview, download our 2021 Budget Summary pdf guide or contact one of the team.
Income tax and National Insurance Contributions
- Income tax rates are unchanged but the basic rate threshold increased to £37,700 and the higher rate threshold increased to £50,270. These will remain at these levels until April 2026.
- The income tax personal allowance increased to £12,570. That too will remain frozen at this level until April 2026.
- National insurance rates are unchanged but the Upper Earnings Limit and Upper Profits Limit are aligned with the income tax higher rate threshold until April 2026.
Van benefit charge
The van benefit charge increased to £3,500; the multiplier for the car fuel benefit increased to £24,600; and the flat-rate van fuel benefit charge increased to £669.
Capital gains tax
Capital gains tax rates have remained unchanged. The Capital gains tax annual exemption is also unchanged and will remain so until April 2026.
Inheritance tax bands will remain unchanged until April 2026.
Investments and Pensions
The Social Investment Tax Relief was to end at 5 April 2021, but has now been extended to 5 April 2023.
The Pension Lifetime allowance is unchanged and will remain at this level until April 2026.
Stamp Duty Land Tax is unchanged except that the £500,000 residential nil rate band (save for the 3% uplift) will continue to 30 June and then fall to £250,000 until 30 September 2021.
VAT rates remain unchanged except that the 5% rate for hospitality, hotel and holiday accommodation and admission to certain attractions will continue until 30 September 2021. It will then drop to 12.5% for the six months to 31 March 2022.
VAT registration and de-registration thresholds are unchanged and will remain so until March 2024.
The Corporation tax rate is currently unchanged but will increase to 25% from April 2023. A small profits rate of 19% will apply for profits not exceeding £50,000, with taper relief up to £250,000. Note, the small profits rate will not apply to close investment-holding companies.
A super-deduction of 130% of the cost is to be available for companies’ expenditure on plant and machinery in the two years ending 31 March 2023. In effect such capital expenditure in those two years gets tax relief at 24.7%, almost the same rate as would apply later, with a 25% corporation tax rate. There is also a 50% first year allowance for expenditure on special rate assets for the two years ended 31 March 2023.
Other business tax changes
The annual investment allowance continues at £1 million for expenditure to 31 December 2021.
Corporate losses and those of unincorporated businesses up to £2 million of 2020/21 and 2021/22 may be carried back to be relieved against earlier profits up to 3 years.
There are changes proposed to the Off-Payroll regime.
Government support in response to the pandemic
- The Coronavirus Job Retention Scheme (also known as the furlough schem) will continue until 30 September 2021, but at gradually reducing effective level.
- Self-employed income support will continue with 4th and 5th awards, and these will extend to those who had filed their 2019/20 tax return by 31 January 2021.
- Restart grants in England of up to £6,000 per premises are to be available for non-essential retail businesses, and up to £18,000 per premises for or hospitality, accommodation, leisure, personal care and gym businesses.
- Universal credit – the extra £20 a week is continued for a further six months.
- Recovery loan scheme – an 80% government guaranteed recovery loan scheme will be made available with loans from £25,000 to £10 million.
- 95% home loans will be guaranteed by the government on homes valued up to £600,000 This will apply to new loans up to 31 December 2022.
- Business Rates – the exemption for certain sectors will continue for the next three months. Sectors to benefit include hospitality and the entertainment industry.
- The National living wage is increased to £8.91 an hour from April.
- Apprenticeships – the Employers’ incentive to take on each new apprentice is doubled to £3,000 for six months to 30 September 2021.
Freeports are to be created in eight locations in England. These will have tax reliefs and simplified customs procedures. Discussions continue with the devolved administrations to ensure freeports will be established in Scotland, Wales and Northern Ireland. The effective date is 9 March 2021.
There will be a 100% enhanced capital allowance available to companies for qualifying expenditure on plant and machinery for use within Freeports. This will be available for expenditure incurred on or after the date the Freeport is designated until 30 September 2026.
There will also be a 10% enhanced rate of Structures and Buildings Allowance (SBA), available for businesses on qualifying expenditure for the construction of new, and renovation of existing, non-residential structures and buildings within Freeports.
The enhanced SBA will be available for qualifying assets brought into use after the date the Freeport is designated and on or before 30 September 2026.
Other tax-related changes and developments
- The Diverted Profits Tax rate will go up from the current rate of 25% to 31% from 1 April 2023.
- Landfill Tax rates are increased, applying only in England and Northern Ireland.
- Climate Change Levy rates are increased.
- Excise duties on alcohol are unchanged.
- Excise duties on petrol and diesel are unchanged.
Interest and penalty regime
A new points-based penalty regime for regular tax return submission obligations replaces existing penalties for VAT, income tax and capital gains tax. The VAT interest rules will change and will be similar to those that currently exist for income tax and capital gains tax.
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This Budget Summary is based on the Chancellor’s Budget Statement on 3 March 2021, supplemented by information from official publications.
It reflects our understanding of proposed changes to tax law and practice at the date of publication, but is not a complete and definitive guide. The Budget proposals may be amended before the Finance Bill becomes law.
Specific advice should therefore be obtained before taking action, or refraining from taking action, on the basis of this information.
© 2021 Shipleys LLP