Budget 2021: What you need to know
The government has now outlined the measures it intends to take in order to tackle the significant effect on the UK economy of the Coronavirus pandemic.
The most anticipated measures are those which support those whose jobs have been hit by the pandemic and associated restrictions. The Coronavirus Job Retention Scheme (CJRS) or furlough had been intended to finish in April 2021 but will now be extended till the end of September. The government will carry on paying 80% of employees' wages for hours they cannot work. The contributions asked of employers will be 10% in July and 20% in August and September.
The self-employed have been particularly hard hit, and support for them will also be extended till September. The government has widened access to support grants so that 600,000 more self-employed people will be eligible for help. The fourth grant has been set as 80% of three months' worth of average trading profits, designed to provide support for February to April 2021. To be eligible, traders must have filed a self-assessment return for 2019/20 by 2nd March.
The fifth grant will cover May to September and is a two-tier system. For those whose turnover was reduced by 30% or more in the tax year ended 5th April 2021, it will be worth 80% of three months' worth of average trading profits. If the turnover reduction was under 30%, it will only be worth 30% of three months' worth of average trading profits.
Concern had been expressed about the likely consequences of the end of the £20 weekly uplift in Universal Credit, which is worth £1,000 a year, and in a welcome development, this will now be extended for another six months. People claiming Working Tax Credit will get a £500 one-off payment.
A development that will affect a great many employers is the announcement that the minimum wage will increase to £8.91 an hour from April 2021. It is currently £8.72.
No changes were made to the rates of income tax, national insurance or VAT. However, the personal allowance will be frozen from the start of the 2021 financial year until 2026.
The higher rate income tax threshold will also be frozen for a similar duration. It currently stands at £50,270 from 6th April 2021.
The big news on taxation comes from the changes to corporation tax. The tax, which is levied on company profits over £250,000 will increase from 19% to 25% in April 2023. However, for companies whose profits are less than £50,000, the rate will remain at 19%. Companies with profits between £50,000 and £250,000 will be charged corporation tax at a tapered rate.
Other welcome news was that for accounting periods ending between 1st April 2020 and 31st March 2022, companies will also be able to carry-back capped trading losses for another two years beyond what is currently allowed, with losses being set off against profits of the most recent year first.
Business, digital and science
In a move that has been welcomed by the hospitality and tourism industry, a sector particularly hard hit by the effects of the pandemic, the reduced 5% VAT will now last till the end of September 2021. It will then rise to 12.5% and will increase to 20% in April 2022.
Keen to encourage businesses to take on new apprentices, the government has announced that its apprenticeship incentives will rise to £3,000. It has also promised an additional £126 million for 40,000 more traineeships in England, funding work placements and training for 16-24 year olds in the next academic year. £7 million has also been announced for a new “flexi-job” apprenticeship programme in England, meaning that apprentices can work with a number of employers in one sector.
For many companies, business rates are a significant expense and one that has been difficult to bear in the current climate. The government has announced that the business rates holiday for firms in in the retail, hospitality and leisure sectors in England will continue until June, and thereafter, a 66% discount will apply.
Companies that have been forced to close as a result of loss of business during the pandemic will benefit from a £5 billion Restart grant scheme. This will be limited to £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses.
In news that will come as a welcome boost to the haulage and transport sector, fuel duty will be frozen for an eleventh consecutive year.
To help those businesses who have been struggling to navigate the reopening of the economy, a new UK-wide Recovery Loan Scheme will make available loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million. All will have a government guarantee of 80%.
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.
Beginning in April 2021, the new super-deduction capital allowance will reduce companies’ tax bill by 25p for every pound they invest in new equipment. It will be introduced for two years for companies that incur qualifying plant and machinery expenditure from 1st April 2021 but not all expenditure will qualify. Used and second-hand assets will be excluded and the general first year allowances exclusions will apply. Expenditures on contracts entered into prior to 3rd March 2021 - even if expenditures are incurred after 1st April 2021 - will also be excluded.
For highly innovative companies working in life sciences, quantum computing or clean technology sectors, amongst others, who are aiming to raise at least £20 million in funding, there is a £375 million UK-wide ‘Future Fund: Breakthrough’.