Budget Update 2021 – Things to know

Rishi Sunak’s budget update included many of the points that were expected, but also some curveballs that no one saw coming. 

Below we have detailed some of the key points from the budget and how they will impact you and your business. 

Furlough Scheme

The furlough scheme has been a huge success and helped many people keep their jobs during the Covid 19 pandemic. 

Rishi Sunak announced today that the scheme will continue until 30th September 2021, with employees receiving 80% of their wages for hours not worked. 

From July 2021 employers will need to contribute to their employee’s wages, with them paying 10% in July and 20% in August and September. 

This extension to the furlough scheme will hopefully prevent unemployment levels from increasing further as a result of the Covid 19 pandemic. 

Self Employed Income Support Scheme

The Self Employed Income Support Scheme has been a lifeline for many people who are self employed. 

Rishi Sunak announced today that the scheme will continue until 30 September 2021.

Self Employed business owners will receive 2 more grants covering February to April and May to September respectively. 

The first grant will be for 80% of the average trading profits of the business for a 3 month period.

The second grant will be for either:

• 80% of the average trading profits of the business for a 3 month period.
• 30% of the average trading profits of the business for a 3 month period.

The level of grant you will receive will be dependant on whether your profits have decreased by more than 30%. If so, you will receive the 80% grant, if not, you will receive the 30% grant. 

The main change to the scheme is that it will include anyone who has filed a self assessment tax return for the 2019/2020 tax year by 2 March 2021. This means anyone who registered as self employed after 5^th April 2019 may now be eligible for the scheme. 

Stamp Duty

Rishi Sunak today announced that the £nil rate band for stamp duty when purchasing a home will remain at £500,000 until 30th June 2021. 

From 1st July 2021 the £nil rate band will decrease to £250,000 until 30th September 2021, which is still double what it was prior to the change last year. 

This will hopefully assist the housing market and help those looking to purchase a new home in the coming months. 

Recovery Loans

The government has announced a new “Recovery Loan Scheme” following the success of the Bounce Back and CBILS loan scheme last year.

Banks will offer between £25,000 and £10,000,000 to businesses as a loan which will be guaranteed by the government for 80% of the loan value. 

This will encourage banks and lenders to offer these loans to recovering businesses as we come out of the Covid 19 Pandemic. 

VAT for the Hospitality and Leisure Sector

The 5% VAT reduction for the hospitality and leisure sector has been widely praised. 

It was today confirmed that this reduced rate of VAT will remain in place until 30th September 2021.

From 1st October 2021 the VAT rate for the hospitality and leisure sector will increase, but only to 12.5%. This will remain in place until April 2022 when the VAT rate will return to its normal levels of 20%.

This will be a welcome help to the pubs and restaurants that have been so badly affected by the Covid 19 pandemic. 

It was also confirmed that there will be no other increases to VAT until at least 2026.

5% Mortgages

The government has agreed with many of the large banks that a new 5% deposit mortgage will be available to assist generation rent become generation buy.

These mortgages will be government backed and will help those looking to purchase a property get a foot on the housing ladder without the need to save a rather large deposit. 

Business Rates Relief

The business rates holiday which was implemented last year has been a help to those businesses with a physical premises. 

Rishi Sunak has confirmed that the business rates holiday will continue until 30th June 2021. 

From 1st July 2021 until the end of the tax year business rates will be discounted by two-thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open during lockdowns due to “essential” status.

This measure will hopefully help high streets survive these unprecedented times. 

Restart Grants

Rishi Sunak has implemented a new grant scheme called the “Kickstart Grant Scheme”.

This scheme will start in April and will provide the following grants:

• Non-essential retail – Grant up to £6,000
• Hospitality and Leisure – Grant up to £18,000 

This will hopefully assist those businesses forced to close due to the Covid 19 pandemic get back on their feet as restrictions end over the coming months. 

Apprenticeship Grants

Employers will now be offered a one off grant of £3,000 for any new apprentice hires they employ, which is a 100% increase on what was previously offered. 

This will hopefully help curb the increase in unemployment and offer better prospects to those coming out of full time education or looking for a change of career. 

Corporation Tax Changes

It was always anticipated that corporation tax rates would increase to help reduce the national debt and the rumours were true, however there are also some new tax reliefs which business owners can make the most of. 

New Corporation Tax Rate

From 2023 the rate of corporation tax will increase from 19% to 25%, a 6% increase!

However Rishi Sunak is introducing a small company threshold to lessen the blow to small business owners. If your Limited Company has taxable profits of less than £50,000 then the rate of corporation tax will remain at 19%. 

As your Limited Company’s profits increase above this threshold up to £250,000 their will be a tapered rate of corporation tax, which will gradually increase. Rishi Sunak confirmed that only 10% of businesses will be paying the full corporation tax rate, so he is targeting the Amazon’s of this world rather than the small local business. 

Loss Carry Back

It has been announced that if you make taxable losses, then for the next 2 years you will be able to carry back those losses 3 years against previous profits in order to receive a tax refund. 

This is a welcome addition for those businesses who have been hit hardest by the Covid 19 pandemic. 

Historically you could only carry back losses 1 year unless your company was being shut down. 

Super Deductions

The most unexpected announcement of the 2021 budget was the “Super Deduction”. 

This scheme will come into effect for the next 2 years and is there to encourage businesses to spend money rather than sit on cash. 

So how does it work? If you invest in certain types of plant and machinery you will receive an additional 30% in tax relief. 

For example:

Company A purchases £10,000 of plant and machinery. Rather than reducing Company A’s taxable profits by £10,000, the “Super Deduction” scheme will reduce Company A’s taxable profits by £13,000.

This scheme is to help kick start business spending and reinvestment in companies, rather than business owners holding onto pots of cash.  

Income Tax Changes

What was a pleasant surprise in the budget was that the tax and NI threshold, as well as the tax and NI rates for income tax will remain the same until 2026. 

The tax free personal allowance will increase to £12,570 in April and the basic rate tax band will also increase to £50,270.

This will prevent those impacted by the Covid 19 pandemic being taxed more over the coming years while they recover financially. 

If you make taxable losses, then for the next 2 years you will be able to carry back those losses 3 years against previous profits in order to receive a tax refund. 

This is a welcome addition for those businesses who have been hit hardest by the Covid 19 pandemic. 

Historically you could only carry back losses 1 year unless your business was being shut down. 

Capital Gains Tax

It was expected that Rishi Sunak would reform the capital gains tax system as part of this budget, however he confirmed that no changes will be made at all until at least 2026.

He confirmed that the annual capital gains tax free band will remain static as well. 

Inheritance Tax

Inheritance tax was also an area that was expected to have large scale reforms.

However, as with VAT and Capital gains tax Rishi Sunak has confirmed that there will be no changes to the rates and tax free allowances until 2026. 

Fuel and Alcohol Duty

It was announced that fuel and alcohol duty will also be frozen for the next 12 months, which will be a welcome relief to vehicle owners, pubs and restaurants. 

Further Information on the 2021 Budget

If you would like to ask us any questions regarding the 2021 Budget Announcement, we will be holding a live webinar on Monday 8th March at 4pm on our Youtube channel.

The video will be published on our Youtube channel following the live webinar so you can refer back to it at any time. 

If you have any other accountancy or tax questions please feel free to call us on 01708 200675, email us at info@edwardsbailey.co.uk or contact us via our website www.edwardsbailey.co.uk. 

Register for the budget webinar on the 8th of March at 4pm.

On the 8th March at 4pm, Edwards Bailey Chartered Accountant’s Managing Director Billy Edwards will be holding a free to attend webinar answering your questions around the budget. Billy will be covering all the hot topics raised from the Chancellor’s budget including Corona Virus support, tax changes and the back to work roadmap.

It will cover:

• Furlough scheme updates
• Self employed grants
• Corporation tax changes
• Super deductions
• Restart loans
• Stamp duty updates
• Income tax updates
• VAT updates
• Business rates relief updates
• Kickstart grants

Please subscribe to our Youtube channel below for the webinar