On Wednesday 4th March, the Chancellor of the Exchequer, the Rt. Hon Rishi Sunak MP delivered the government’s Budget for 2021.
You can find below in summary some of the measures announced:
1. For unincorporated businesses, losses up to £2m in 2020/21 or 2021/22 can be carried back up to 3 years
For companies, losses up to £2m occurring in accounting periods between 1 April 2020 and 31 March 2021, and then accounting periods between 1 April 2021 and 31 march 2022 (After prior year loss relief).
For both unincorporated businesses and limited companies, the loss is to be carried back against later years first.
2. Fourth and fifth grant covering lost earning until September 2021
The fourth grant will be available from late April, covering 80% of lost earnings during February, March and April up to £7,500. The return for 2019/20 must have been filed by 2 March 2021.
The fifth and final SEISS grant covers lost earnings from May onwards, and can be claimed from late July 2021. The grant will be reduced based on the proportionate effect on turnover. If turnover fell by 30% or more, the full grant will be payable. If turnover fell by less than 30% the grant will be 30% rather than 80% and capped at £2,850.
3. Incentives for companies to take on new apprentices
Between 1 April 2021 and 30 September 2021 is to rise to £3,000 from £1,500 (£2,000 for apprentices aged under 25).
This is in addition to the existing £1,000 payment the government provides for all new 16-18 year old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.
4. Corporation tax
Corporation Tax on company profits above £250,000 will rise from 19% to 25% in April 2023. The rate will be kept at 19% on company profits below £50,000. Profits between £50,000 and £250,000 will be subject to a ‘tapered’ rate.
AIA of £1m is to continue to 31 December 2021. New 130% “super deduction” for qualifying plant and machinery (main rate) assets and 50% first year allowance for special rate assets for two years from 1 April 2021. Does not include second-hand and used assets.
Disposals should be treated as balancing charges and not written off. They will be subject to a factor of 1.3.
6. Research and Development
The yearly R&D tax credit for businesses will be capped at £20,000, plus 3 times the company’s total PAYE and NIC liability, in order to deter abuse.
The government will consider bringing data and cloud computing costs into the scope of relief alongside a number of other policy options and priorities at the wider review.
7. Software Grant
A grant of up to 50% (limited to £5,000), to be given when purchasing approved software to increase productivity.
8. VAT on Hospitality Industry
VAT rate of 5% on hospitality is to be maintained until September 2021, it will then rise to 12.5% for the following 6 months, then revert to 20%.
9. Furlough Scheme
The furlough scheme, will now continue until the end of September. Anyone on furlough during that time will continue to receive 80% of their salary from the government, capped at £2,500 a month. However, employers will have to contribute 10% from July and 20% in August and September towards the hours their staff are not working.
10. Business Rates
Business rates relief for eligible retail, hospitality and leisure properties is to continue at 100% until June 2021. This will be followed by 66% business rates relief for the period 1 July 2021 to 31 March 2022, capped at £2m per business properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
The government will provide ‘Restart Grants’ in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
11. Stamp Duty
The temporary stamp duty holiday has been extended to 30 September 2021. To 30 June 2021 there will be 0% stamp duty on the first £500,000 of property purchases. Then from 1 July 2021 to 30 September 2021 this will be reduced to £250,000. It will be reduced back to £125,000 from 1 October 2021.
12. Making Tax Digital (MTD)
Self-employed businesses and landlords with annual income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.