2021 Budget Summary

In the context of the Covid-19 pandemic, the March 2021 Budget has taken on a particular significance. Josh Ruthven from our tax team talks through the highlights and how they may impact you.

The 2021 Budget was delivered on 3rd March and the hugely anticipated announcement did not disappoint, as the Chancellor outlined the UK’s policy changes in response to the rising debt from the coronavirus pandemic. Rishi Sunak had to find a balance between supporting those affected by the pandemic and recouping the billions spent on the various support schemes that are in place for businesses, the self-employed and employees throughout the year.

Let’s take a look at some of the policies which could affect your personal finances.

Stamp Duty Holiday

As predicted, the stamp duty cut on residential properties until 31 March 2021 has been extended for a further three months to 30 June 2021. In order to create a smooth transition back to its previous rates, the cut will be reduced to £250,000 for June to September before returning to the normal figure of £125,000 from October.

Corporation Tax

In April 2023, the rate of corporation tax will be increased to 25%, but the Chancellor is creating a small profits rate which ensures only businesses with profits over £250,000 will be taxed at this rate. Businesses with profits below £50,000 will still pay tax at 19%. Any companies with profits in between the thresholds will pay tax at a tapered rate.

Self-employed support

The Chancellor announced a further two grants for the self-employed up until September. The first, spanning February to April, will be 80% of average trading profits. The second grant will be from May, with more details to be announced. People who were not previously eligible, but who have filed their 2019/20 tax return by 3 March 2021, will now be able to claim the fourth and fifth grants.

Furlough scheme

The furlough scheme has now been extended until the end of September. Employees will still be receiving 80% of their usual pay but, from July, employers must contribute 10% and in August and September this contribution will increase to 20%.

Universal Credit and National Living Wage

The Universal Credit top up of £20 per week has been extended for a further six months up until the end of September. Additionally, the National Living Wage has now increased to £8.91 per hour.

Personal allowances

The planned increase of the personal allowance to £12,570 in 2021/22 and the basic rate band to £50,270 will still go ahead. However, income tax and National Insurance rates will then be frozen until April 2026.

VAT

To protect the hospitality and tourism sector, the 5% reduced rate of VAT will be extended for six months until the end of September. Following this, there will be a further six months at a rate of 12.5%, before a return to the normal 20% rate from next April. Additionally, the registration threshold for VAT will be frozen like income tax rates.

Restart grants

In order to help businesses get up and running again, there is a new restart grant available. Non-essential retail businesses will open first and can claim grants up to £6,000. Hospitality and leisure businesses opening later will be able to claim grants of up to £18,000.

Business rates

The 100% business rates holiday will continue to the end of June. Then, for the following nine months, there will be a business rate cut by two thirds up to a maximum of £2m per business, before returning to normal rates.  

Housing

In a bid to support the property market, the government are now offering lenders the guarantee they need to provide 95% mortgages.

The Super Deduction

It was predicted the government would look at increasing business investment and the way they have done this is by offering an enhanced deduction. This will occur when businesses invest in new equipment. They can offset all of the cost of the equipment against tax, plus an additional 30%. This will apply for the next two years.

The proposals in the 2021 Budget represent significant changes to the finances of people across the country, whether it's business owners, the self-employed or those in employment.

Tax Rates Download

Our handy all-year-round tax guide will be available to download soon. It will keep you up to date on the latest tax rates and other essential information. If you would like a copy, please contact our team.

If you require any advice or clarification on any of the topics mentioned in this article or how tax rates apply to your business, or if you would like any help in applying for any of the Government coronavirus support schemes contact us by calling on 0115 955 5500 or email at enquiries@pagekirk.co.uk