Omnium Wealth Management

Spring Budget March 2021: Setting out the road to recovery

“It’s going to take this country a long time to recover from this extraordinary economic situation, but we will recover.”
Chancellor Rishi Sunak

        Read our full Budget Report here   >   

 

Overview

In yesterday’s Budget, the Chancellor, Rishi Sunak, attempted to strike a balance between continuing to prop up the businesses worst affected by Covid-19, while setting out a roadmap to wean the UK economy off this emergency support.

In his second Budget and 14th fiscal announcement since succeeding Sajid Javid in February 2020, Sunak resisted the urge to start raising the main taxes in a bid to rebuild the UK economy and tattered public finances.

The financial fallout from Covid-19 over the last year has been the fiscal equivalent of fighting a war, with more than £280 billion already committed towards protecting the UK economy since March 2020.

The Office for Budget Responsibility expects that figure to grow in the months ahead, especially with Sunak announcing a “fifth and final” taxable grant through the self-employed income support scheme and a further extension to the furlough scheme.

The Chancellor announced many measures and extensions to existing schemes to continue to help those affected by the coronavirus pandemic, such as grants, business rates holidays and incentives for employers to take on apprentices.

However, Mr Sunak also proposed measures to help claw back some of the deficit with an increase, from 2023/24, to the main rate of Corporation Tax for limited companies. There is, however, a concession, as businesses with annual profits below £50,000 will be spared.

‘Stealth tax raids’ arrive most notably in the form of a freeze to the lifetime allowance for pension contributions. This means more people risk a 25% levy on extra income from their pension pot, rising to 55% if they draw down a lump sum.

The personal allowance and higher-rate threshold will increase in April 2021. Beyond that, many taxpayers will be pushed into a higher income tax bracket over the next five years following Sunak’s decision to freeze these thresholds until 2026.

Overall, the Chancellor is still clearly in spend mode, but with hints of what might be waiting down the road as the UK economy starts to recover and the national debt demands to be paid.

Personal

  • Rates and allowances: The tax-free personal allowance throughout the UK will increase to £12,570 for the 2021/22 tax year. The basic-rate band will rise to £37,700, while the higher-rate threshold will rise to £50,270. The additional-rate band will remain at £150,000. All of these thresholds will remain unchanged until 2025/26.
     
  • NICs: The threshold for class 1 primary contributions paid by employees and the class 4 National Insurance Contributions (NICs) paid by the self-employed will increase from £9,500 to £9,568 for the 2021/22 tax year.
     
  • Capital Gains Tax: The current annual exempt amount for individuals and personal representatives of £12,300 and £6,150 for trustees of settlements will be maintained at these levels for each tax year up to and including the 2025/26 tax year.

Business

  • The main rate of Corporation Tax will remain at 19% for the financial years beginning 01 April 2021 and 01 April 2022. From 01 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.
     
  • Super Deduction: From 01 April 2021 until 31 March 2023, companies investing in new qualifying plant and machinery will benefit from a 130% first-year capital allowance. This ‘super deduction' might allow companies to cut their tax bill by up to 25p for every £1 invested.
     
  • The Corporation 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 01 April 2020 to 31 March 2022.

VAT

  • Hospitality discount extended: The current 5% VAT rate for the hospitality sector, holiday providers and attractions will be extended by six months to 30 September 2021. This was due to expire on 31 March 2021.
     
  • VAT thresholds: The VAT-registration threshold will be maintained at £85,000 for a further two years from 01 April 2022. On this basis, the VAT-registration and deregistration threshold will remain unchanged until at least 31 March 2024.
     
  • Deferred VAT payments: When Covid-19 first hit, the government allowed businesses to defer payment of VAT returns due between 20 March 2020 and 30 June 2020. Originally, this VAT was due to be paid back by 31 March 2021. Businesses will be able to spread the payment of this VAT over a maximum of 11 monthly payments.
     
  • Unpaid VAT sanctions: New sanctions were announced for late payment of VAT and failure to submit returns. The new rules will replace the current default surcharge regime.
     
  • Points-based VAT sanctions regime: New rules will be introduced where a taxpayer fails to submit VAT returns. These will apply to VAT return periods beginning on or after 01 April 2022. Taxpayers will accumulate points in respect of the number of failures to submit returns or tax information.

Covid-19 support

  • Recovery loan scheme: The recovery loan scheme ensures businesses can access loans and other finance of up to £10m per business once existing Covid-19 loan schemes close. The government guarantees 80% of the finance to the lender. The scheme launches on 06 April 2021 and is open until 31 December 2021.
     
  • Furlough scheme: The government is extending the furlough scheme until the end of September 2021.
     
  • Business rates: Eligible retail, hospitality and leisure properties in England will continue to benefit from 100% relief until 30 June 2021.
     
  • Self-Employment Income Support Scheme (SEISS): 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. A "fifth and final" SEISS grant will cover May to September 2021 and can be claimed from late July.

Other announcements:

  • Stamp Duty Land Tax (SDLT): Due to Covid-19, the Chancellor previously announced a temporary increase to the nil-rate band for residential property before SDLT was due, from £125,000 to £500,000, for the period 08 July 2020 to 31 March 2021. Yesterday, Mr Sunak announced a staged withdrawal of this measure by extending it to 30 June 2021, then introducing a nil-rate band of £250,000 from 1 July 2021 to 30 September 2021.
     
  • Mortgage guarantee scheme: A new mortgage guarantee scheme will kick in from April 2021, providing a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. The scheme will be available for new mortgages up to 31 December 2022.
     
  • Duties: Fuel duty and short-haul air passenger duty remain unchanged, as do alcoholic duties for beer, cider, wine and spirits.

 

        Read our full Budget Report here   >   

Get in touch

If you would like to discuss how any of the measures announced may affect you or your business, give us a call today on 01483 205890.

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