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Budget 2021: What it means for you, your family and your business

03.03.2021

Private Client

Those of us that are working in the office today listened, with baited breath, to the Chancellor’s 2021 Budget announcement.

We all know that Coronavirus has fundamentally changed the way we live. Our economy has shrunk to its lowest level in over 300 years – it’s going to be a long journey ahead to recovery.

The Chancellor's announced his three-step plan:

1. to protect jobs and our livelihood;

2. to fix finances;

3. to lay firm foundations to begin work to rebuild our future recovery.

Budget 2021: Full details

To help protect jobs and our livelihood, the Chancellor announced:

Help for businesses, employees and the self-employed

An extension to the Furlough scheme for businesses and their employees to 30 September 2021 (although employers are expected to contribute from July 2021).
Support for the self-employed is also being extended to 30 September 2021.
Recognising that those who commenced their businesses last tax year who had been left out in the cold, the 4^th and 5^th grant will be available for them to claim - providing their 2020 Tax Return had been submitted before today.

Businesses are to be offered

a financial incentive to take on new apprentices;
a new re-start grant and a government backed recovery loan scheme to replace existing support;
a business rates holiday to 30 June 2021 with a discount thereafter.

VAT

The 5% VAT rate will continue for those in the hospitality and tourism industries to 30 September 2021. Thereafter, it will be discounted to 12.5% until April 2022 when the 20% standard rate will resume.
The VAT registration threshold is to be frozen at £85,000 until 2024.

Trading losses

Continuing businesses realising trading losses may be able to carry these back for up to three years, as opposed to one, to reclaim tax and aid cashflow.

Tax relief on plant and machinery purchases

A ‘super-deduction’ of 130% of their cost will be permitted until 31 March 2023 - to encourage businesses to invest in productivity-enhancing plant and machinery to help their businesses grow.
100% tax relief will be given on other plant and machinery expenditure up to £1m to 31 December 2021.

Stamp Duty Land Tax Holiday (SDLT)

We’ve seen an unprecedented number of individuals taking advantage of the Stamp Duty Land Tax holiday already.
Hopefully, the Stamp Duty Land Tax extension to 30 June (and discounted rate to 30 September 2021) will help first time buyers and others complete their purchases.
The Chancellor is determined to encourage property ownership and hopes that, with government backing, many lenders will soon be offering a 95% mortgage.

We all recognise that Coronavirus has caused a huge economic shock to the UK. Our levels of borrowing are similar to post-WW2 levels and it will take many years (and many governments) to pay this back.

The Chancellor is having to balance the provision of continued support with a solution to fix public finances although he did confirm, as they promised in their manifesto many years ago now, not to raise Income Tax, National Insurance or VAT.

Instead, he has announced that he will be freezing the Personal Allowance at £12,570 and the limit at which we pay 40% Income Tax at £50,270 from 6 April 2021 until 6 April 2026; a sneaky but fair way to raise cash – we shouldn’t lose any income, it just won’t increase over the next few years.

The Capital Gains Tax annual allowance of £12,300, the pensions lifetime allowance of £1,073,100 and the IHT threshold of £325,000 are all frozen until April 2026; minor tinkering to increase the tax take over the next few years – we were expecting these to be increased in line with inflation.

However, Corporation Tax for most companies generating profits in excess of £250,000 will rise to 25% from April 2023.

Those with profits of £50,000 or less will continue to pay Corporation Tax at 19%, whereas those generating profits in between these two limits will probably pay at the 25% rate but will benefit from marginal relief.

Despite all this, it is envisaged that around 70% of UK companies will be unaffected; the UK is still a great place to do business – our Corporation Tax is still the lowest in the G7.

For those of us that are still working at home, we will not be taxed on our new homeworking equipment that our employer has purchased for us until after 5 April 2022.

Nor will we be taxed on the cost of a Coronavirus antigen test paid for by our employer until after April 2022, as we all make plans to slowly return to the office safely.

Significant tax rises, at this early stage, would undermine the recovery of our battered economy although significant fiscal measures will, no doubt, be required in the future

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If you would like to know how Budget 2021 affects you, your family and your business.