On Wednesday 3 March, Chancellor Rishi Sunak presented the 2021 Budget, pledging to 'do whatever it takes' to support UK jobs and workers in the wake of the coronavirus (COVID-19) pandemic and promising to fix UK public finances and begin building the future economy.
Amongst the announcements was an extension to the Coronavirus Job Retention Scheme (CJRS) until 30 September; confirmation of fourth and fifth grants for the self-employed under the Self-employment Income Support Scheme (SEISS); an extension of the stamp duty holiday in England until 30 September; and £5 billion in 'restart' grants to boost businesses once the lockdown in England ends. Mr Sunak also announced an increase in the rate of corporation tax to 25%, effective in 2023, and a capital allowances super-deduction providing allowances of 130% on most new plant and machinery.
Here, we take a look at these measures in greater detail.
Rise in corporation tax rate
The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023, when the rate will increase to 25% for companies with profits over £250,000. The government stressed that this is still the lowest rate compared to other G7 countries. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less and companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
Meanwhile, companies have been encouraged to invest in new plant and machinery in order to take advantage of the super-deduction, which provides allowances of 130%.
COVID-19 financial support schemes
From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes. The Bounce Back loan scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) will be accessible until the end of March 2021.
Additionally, to support businesses in re-opening following the current lockdown in England £5 billion in 'restart' grants will be made available. Non-essential retail businesses re-opening first will be eligible for up to £6,000 and the leisure and hospitality sectors, which have been worse affected and will re-open later, will be eligible for up to £18,000.
Extension of the CJRS
The Chancellor confirmed the extension of the CJRS until 30 September 2021. The level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees' wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:
- for July 2021, 70% of furloughed wages, up to a maximum of £2187.50; and
- for August and September 2021, 60% of furloughed wages, up to a maximum of £1,875.00.
Employers will need to continue to fund employer national insurance contributions (NICs) and mandatory minimum automatic enrolment pension contributions.
Confirmation of fourth and fifth grants under the SEISS
Budget 2021 confirmed details of a fourth SEISS grant. This will be 80% of three months' average trading profits to be claimed from late April 2021. Payment will be in a single instalment and capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who have filed a 2019/20 self assessment tax return prior to 3 March 2021, meaning that newly self-employed from April 2019 now qualify subject to satisfying the other conditions.
A fifth and final grant was announced and can be claimed from late July 2021 to cover the period May to September 2021. This grant will be determined by a turnover test.
The Chancellor announced an extension of 100% business rates relief for eligible retail, hospitality and leisure properties in England. The extension is valid until 30 June 2021. Following this, business rates relief of 66% will apply for the period spanning 1 July 2021 to 31 March 2022. This will be capped at £2 million per business for properties that closed on 5 January 2021 and £105,000 per business for other eligible properties.
Reduced VAT rate for hospitality sector
In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions. In September 2020 the Chancellor extended the reduced rate to 31 March 2021.
The government announced an extension of the reduced rate until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
In 2020 the government consulted on proposals to create up to ten Freeports across the UK. A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a sea port, airport or rail port. East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.
The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.
Stamp duty land tax
The stamp duty nil rate band on residential properties in England up to £500,000 will continue until the end of June. It will taper to £250,000 until the end of September, and then return to the usual level of £125,000 from 1 October.
Land and buildings transaction taxes are devolved to Scotland (Land and Buildings Transaction Tax (LBTT)) and Wales (Land Transaction Tax (LTT)). Stamp Duty Land Tax (SDLT) applies to transactions in England and Northern Ireland. All these taxes have had a temporary increase in the nil rate threshold for residential properties. The thresholds were set to return to the previous thresholds from 1 April 2021. Following the Budget, the Welsh Finance Minister confirmed that the LTT temporary reduction period will be extended by a further three months so that it will end on 30 June 2021.
Mortgage guarantee scheme
The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.
Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, is designed to increase the availability of mortgages on new or existing properties for those with small deposits.
To discuss how these Budget measures may affect you, please get in touch. We would be delighted to speak with you.