March 2021 Budget Highlights
We have summarised the key points from the 3rd March 2021 budget that might impact business owners.
From 1 April 2023, the rate of corporation tax will increase from the current 19% to 25% for businesses with profit of more than £250,000. For businesses under £50,000 profits, it will remain at 19%, but between £50k-£250k, the rate will be tapered
Due to many companies making losses during the pandemic, the loss carry back period for companies has been extended from the usual one year to three years. This applies to losses made in financial years 2020/21 and 2021/22.
To encourage investment, for two years, between 1 April 2021 and 31 March 2023, capital expenditure on plant and machinery used by a company will receive a 130% deduction against corporation tax. This means if you spend £10,000 on plant and machinery, you will receive a deduction in corporation tax of £2,470 (19% of £10,000 x 130%) rather than £1,900 now.
The Coronavirus Job Retention Scheme is extended from 30 April 2021 to 30 September 2021. Whilst the claim rate remains at 80%, it tails off from July onwards to 70% and 60% for August and September 2021.
Self Employed Grants
Self employed sole traders (not including limited company directors), who have been impacted by the pandemic, can make grant claims from April 2021. The impact of the pandemic must meet certain financial conditions and the taxpayer must make the claim themself to HMRC. Individuals who started self-employed in 2019/20 can now also make claims.
Business rates holiday extension
Further business rates relief will apply to eligible retail, hospitality and leisure properties with 100% relief from April to June 2021 and partial (66%) relief from July 2021 to March 2022.
Recovery Loan scheme
A new business loan scheme will give lenders an 80% guarantee on eligible loans from £25,000 to £10m. The loans can be used for “any legitimate business purpose, including growth and investment” and will remain open until 31 December. Applications should be made to banks directly.
The government will provide grants in England of up to £6,000 per premises for non-essential retailers and up to £18,000 per premises for hospitality, leisure, accommodation, personal care and gym businesses. These will be most likely administered by local councils.
The VAT registration threshold will remain at £85,000 until at least 2024. It’s been at this rate since 2017 and means that more businesses will be caught up in the VAT threshold than otherwise if it had risden in line with inflation.
Hospitality & Tourism rate
The 5% rate for this sector will be maintained until 30 September 2021 and thereafter it will be 12.5% until 31 March 2022. After this, it will revert back to the usual 20%.
Stamp Duty on property
SDLT on buying a new home remains at 0% upto £500,000 until 30 June 2021 and thereafter 0% on the first £250,000 until 30 September 2021.
Mortgage Guarantee Scheme
A new scheme will be introduced from April 2021, which will provide a guarantee to lenders on 95% loan to value mortgages on homes up to £600,000 meaning a home can be purchased with a 5% mortgage. Buyers will be able to fix their initial rate for up to five years and the scheme will be available until 31 December 2022 and will be for new and existing properties.
Freeze on bands
Personal tax rates and bands have been frozen for the five years from 2021/22 to 2025/26. The personal allowance (i.e. what an individual can earn tax free) will be £12,570 and the basic rate tax band £37,700, giving a combined tax-free and basic rate band of £50,270.
Whilst at first glance, a freeze such as this could be seen as a positive, as the post pandemic recovery leads to wage and price inflation, the tax cost will increase significantly. The government’s own forecasts are predicting an increase of 27% in income tax receipts over the period and 42% in capital gains tax.