On 3 March 2021 the Chancellor announced the UK budget provisions for 2021.
The furlough scheme, which pays 80% of employees’ wages, will be extended until the end of September 2021, but employers will be asked to contribute 10% in July and 20% in August and September 2021. The temporary GBP 20 per week increase to the Universal Credit Standard Allowance is to continue for a further six months. A one-off payment of GBP 500 will be made to eligible Working Tax Credit recipients.
Corporation tax
The rate of corporation tax will increase to 25% from April 2023. The full 25% rate will apply to companies with profits above GBP 250,000. The rate for companies with profits below GBP 50,000 will remain at 19%. A tapered tax rate will apply to profits above GBP 50,000 and below GBP 250,000.
Capital Allowances
For two years from April 2021 to March 2023 a new super-deduction of 130% of the cost of new plant and machinery will be available to companies.
Also, from April 2021 to March 2023 investments in assets that normally qualify for the 6% special rate writing down allowances will receive a 50% first year allowance.
The temporary GBP 1 million limit for the Annual Investment Allowance (AIA) will be extended by one year to 31 December 2021.
Trading Losses
Incorporated and unincorporated businesses will be able to carry back losses incurred for three years. The measure applies to losses incurred by unincorporated businesses in tax years 2020/21 and 2021/22, up to a maximum of GBP 2 million.
For companies, the GBP 2 million maximum limit applies to losses, after carry-back for one year, for relevant accounting periods ending between 1 April 2020 and 31 March 2021, and a separate GBP 2 million maximum limit applies to periods ending between 1 April 2021 and 31 March 2022. The GBP 2 million limit applies at group level.
Diverted Profits Tax
The rate of Diverted Profits Tax is to increase to 31% from 1 April 2023.
Business Rates
The 100% business rates holiday in England will continue from April until June 2021.
Research and Development (R&D) tax relief
From 1 April 2021 the amount of R&D tax credit for small and medium enterprises is capped each year at GBP 20,000 plus three times the total liability to PAYE and national insurance contributions.
A consultation is being launched on the R&D tax relief schemes to establish how they are currently supporting private sector R&D and to consider where changes are necessary. The review will look at the structure and administration of the reliefs; qualifying expenditures; and the definition of research and development.
Enterprise Management Incentives
A call for evidence has been launched in relation to Enterprise Management Incentives (EMI), and in particular to consider if the scheme can be expanded to allow access to the scheme for more companies.
Value Added Tax (VAT)
The 5% reduced rate of VAT for tourism and hospitality will be extended for six months to 30 September 2021. A 12.5% rate will apply after that for a further six months until 31 March 2022.
Income Tax and CGT
The rates of income tax remain the same. The personal allowance and the higher rate threshold will rise as planned but will then be frozen until April 2026. The capital gains tax (CGT) exempt amount is to remain at the current level (GBP 12,300 for individuals) until 2025/26.
Stamp Duty
The increased nil rate band for stamp duty on residential property will continue at GBP 500,000 until 30 June 2021, and then reduce to GBP 250,000 until 30 September 2021 before returning to GBP 125,000 from 1 October 2021.
Inheritance Tax
The Nil rate bands are to remain at existing levels until April 2026.
Other measures
Other measures include:
- Rates of fuel duty and of duty on alcohol are frozen;
- Eight new free ports are to be set up, offering enhanced capital allowances and other relief;
- A new Help to Grow scheme will provide small and medium enterprises with digital and management tools to promote innovation and growth.
- A new GBP 5 billion Restart Grant scheme is to help retail businesses;
- A new Recovery Loan Scheme will be launched to replace the current government guarantee schemes for lending to business after the existing schemes close at the end of March 2021.
