March 2021 Budget Notes
The following notes are not intended to be a comprehensive narrative on all of the Budget announcements but rather a summary of the items that we believe may be of value to clients.
Please do let us know if you require any clarification or if there are any items that you feel we may have overlooked.
For HMRC’s overview of the Budget announcements, you can visit their notes.
Recovery Loan Scheme
The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes close, providing support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.
Once received, the finance can be used for any legitimate business purpose, including growth and investment.
The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.
The scheme launches on 6 April and is open until 31 December, subject to review. Loans will be available through a network of accredited lenders, whose names will be made public in due course.
The rate of Corporation Tax will increase to 25%, however, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Super Deduction Capital Allowance
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme has been extended until 30 September 2021 and the level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the level of grant will be reduced to 70% and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
You can continue to choose to top up your employees’ wages above the 80% total and £2,500 cap for the hours not worked at your own expense.
The level of the grant will be reduced to 60% in August and September.
National Minimum Wage and National Living Wage
The National Living Wage will increase by 2.2 per cent from £8.72 to £8.91, and will be extended to 23 and 24 year olds.
The National Minimum Wage will also increase for 16-22 year olds.
Income Tax and National Insurance
The government will maintain the Personal Allowance at £12,570 and higher rate threshold at £50,270 for 2022 to 2023, 2023 to 2024, 2024 to 2025 and 2025 to 2026. The additional rate threshold is fixed at £150,000. The NICs Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate threshold at £50,270 for these years.
There are no changes to the rates of Income Tax or NI.
Self-Employment Income Support Scheme
It was confirmed that the fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged.
Your eligibility for the scheme will now be based on your submitted 2019 to 2020 tax return. This may also affect the amount of the fourth grant which could be higher or lower than previous grants you may have received.
Inheritance Tax Nil-Rate Band and Residence Nil-Rate Band
The government will introduce legislation in Finance Bill 2021 so that the inheritance tax nil-rate bands will remain at existing levels until April 2026.
The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million.
This means qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.
This will have effect from 6 April 2021 to 5 April 2026.
Capital Gains Tax Annual Exempt Amount (AEA)
The current Capital Gains Tax annual exempt amount will remain at its present level of £12,300 for individuals, personal representatives and some types of trusts for disabled people and £6,150 for trustees of most settlements for the tax years until 2025 to 2026. This will have effect from 6 April 2021.
Individual Savings Account (ISA) Annual Subscription Limit
The adult ISA annual subscription limit for 2021 to 2022 will remain unchanged at £20,000.
VAT Reduced Rate for Tourism and Hospitality
The government will extend the temporary reduced rate of VAT of 5% for hospitality, holiday accommodation, and attractions 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 standard rate.
Stamp Duty Land Tax: Extension to the SDLT Temporary Rates
The Government will extend the temporary increase to the Stamp Duty Land Tax nil rate band for residential property in England and Northern Ireland that was due to end on 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.