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Spring Budget 2021 – Wednesday 3rd March 2021

Spring Budget 2021

It has been 12 months since the country first went into lockdown due to Covid-19 and having already spent billions of pounds, Rishi Sunak pledged many more in his Spring Budget 2021 – There’s Support for All!

The chancellor has pledged more than £500bn of support for many established businesses, the self-employed who had previously missed out along with the ongoing employment safety net for employees up and down the country.

What did he announce? – Here are the key points

  • Furlough Scheme Extension and an increase in NMW
  • Two Self-Employed income support grants
  • Support for VAT payments and a new reduced rate
  • Business rates relief and additional grants
  • Apprenticeship and training incentives
  • Many tax rates and bands frozen
  • A planned hike in corporation tax

Here are the key business facts in detail:

  • Furlough Scheme Extension

The Coronavirus Job Retention Scheme (CJRS/Furlough) has been extended to the end of September 2021. Employer contribution will be 10% in July, and 20% in August and September.

The UK Government will continue to pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, up to the end of June 2021.

For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875.

  • Self-employed income support grants

The fourth and fifth Self Employed Income Support Scheme (SEISS) grants were confirmed at 80% of trading profits over an average of last three years and will now include the 2019/20 tax return if filed on time. The fourth grant will be available from Mid April.

The fifth grant will be based on a turnover test. A lower grant will be available if the impacted reduction in turnover has been less than 30%. Further details will be made available later in the year.

  • Incentives for Apprenticeships and Trainee Programmes

There’s £126 million for high quality work placements and training for the 16-24 year olds during the 2021/2022 academic year. Employers who provide work experience for training will continue to receive funding of £1,000 per trainee.

New apprentices taken on between 1st April and 30th September 2021 will receive £3,000 per trainee, being an increase of £1,000 from the previous announced scheme. The funding is reduced to £2,000 for those aged 24 and under. This is in addition to the £1,000 payment for 16-18 year olds.

  • VAT deferral

Deferred VAT payments due between 20‌‌ ‌March and 30‌‌ ‌June 2020 should be paid by 31st ‌March 2021. If you cannot afford to pay by 31st ‌March this year, you can now use the online VAT deferral new payment scheme to spread your payment.

The new scheme lets you pay your deferred VAT in equal monthly instalments, interest free. You can spread your payments across a number of months depending on when you join – the earlier you join, the more months you have to spread your payments across.

  • Reduced VAT rate extended

There will be an extension to the VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September. This will be followed by a new 12.5% rate for a further six months until 31st March 2022.

  • Business rates holiday

Eligible businesses in the retail, hospitality and leisure sectors in England will benefit from 100% business rates relief until the end of June and then a 67% reduction for the remainder of the year.

  • New Restart Grants Programme

£5 billion for new Restart Grants – a one off cash grant for hospitality, accommodation, leisure, personal care and gym businesses in England. Non-essential retail can claim up to £6,000 with businesses in hospitality and leisure eligible to claim up to £18,000.

  • National minimum wage increase

National Living wage to increase to £8.91 per hour and this will be extended to 23 and 24 year olds. From 1st April 2021 the new National Living Wage and National Minimum Wage hourly rates will be:

£8.91 for those 23 years old and over

£8.36 for 21-22 year olds

£6.56 for 18-20 year olds

£4.62 for under 18s

£4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.

  • SDLT nil rate band extension

The temporary cut in Stamp Duty Land Tax in England and Northern Ireland has been extended until September. The nil rate band threshold of £500k is to be extended for a further three months, then phased down to £250k until end of September 2021.

  • Universal credit £20 increase extension

There will be a Six-month extension of the £20 per week Universal Credit uplift in Great Britain, with the Northern Ireland Executive receiving additional funding to match the increase. There will also be a one-off payment of £500 to eligible Working Tax Credit claimants across the UK.

  • Additional funding for arts and sports and community projects

£700m has been earmarked for supporting arts, culture and sport businesses – with a £150m fund so communities can take ownership of pubs, theatres and shops at risk of being lost.

  • Capital allowance rate of 130% for super investments!

Increased reliefs, albeit temporary, for companies who invest in plant and machinery from 1st April 2021. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:

– a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances

– a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances

  • Mortgage Guarantee Scheme

A new mortgage guarantee scheme will be introduced from April 2021. The scheme will provide a guarantee to lenders offering mortgages on homes to the value of £600,000 where the buyer is only required to contribute a 5% deposit.

There will be an opportunity to fix the initial interest rate for a period of five years and the scheme will be available for new mortgages until 31st December 2022.

Some things didn’t change

  • Personal allowance band and income tax thresholds – frozen until 2026

Personal income tax thresholds frozen from next year until 2026 at £12,570 for the basic rate and £50,270 for the higher rate

  • Duties on spirits, beer, cider and fuel – all remain frozen
  • VAT Registration threshold remains at £85,000 pa – frozen for 2 years
  • Inheritance tax nil rate band – remains frozen until April 2026
  • No increase to rates of income tax, national insurance or VAT
  • Pensions Lifetime Allowance – frozen until at £1,073,100 until April 2026
  • Annual ISA limited – unchanged at £20,000
  • CGT – no changes to rates or the annual exemption

BUT – how will some of the above be financed?

  • Corporation tax

Unfortunately, there has to be a BUT and this one is a big one! The Chancellor has announced a hike in the corporation tax rate from 19% up to 25% from April 2023 for British companies with profits above £250,000, with a tapering rate where profits exceed £50,000.

However, to support the cashflow of businesses, the government is extending the loss carry back rules worth upto £760,000 per company.

  • R&D Tax Credits Capped

They will also be capping the amount of SME payable R&D tax credit that a business can receive in any one year at £20,000 (plus three times the company’s total PAYE and NICs liability).

Rishi Sunak still plans to spend billions. However, as each fiscal year passes, he has mapped out a plan to spend less which will inevitably mean he will give out less. He then expects the British public to start giving some of it back!

GET IN TOUCH WITH ONYX

Need help with your payroll or VAT? Are you one of the 600,000 newly self-employment that could benefit from the new income support grants? Or will one of the new Restart Grants help your business re-open as the restrictions are lifted. We are here to help you!

Contact us now or e-mail us at  enquiries@onyxaccountants.co.uk for a FREE no obligation consultation.

Got any questions or queries? Our friendly team of tax specialists are happy to help. Just drop us a line! Call us on 0121 753 5522 or 01902 759 800.

Keep up to date with the latest announcements by visiting our dedicated page https://onyx.accountants/covid/