Budget 2021 at a Glance

Budget 2021
Budget 2021

On 3 March 2021, Chancellor Rishi Sunak delivered targeted balance tax reliefs and tax increases in order to support struggling sectors in the UK while promising robust finances in the longer term.

After a year with significant and unique policies that have supported the UK economy throughout the pandemic, it was really important to know how the government would pay the large sum of debt incurred with maintaining the economic growth.

According to official forecasts by the Office for Budget Responsibility (OBR), the GDP of the UK will grow by 4% this year.

To ensure post-pandemic financial recovery and a stable economic future, the chancellor announced a budget with a focus on enhancing support and rebuilding public finance.

Besides, CGT rates, income tax, and NICs remain unchanged; the personal allowance and the higher rate threshold will be frozen from tax years 2021-22 to 2025-26.

Here, let’s have a glance at the key measures of Budget 2021.

UK Budget 2021

This blog post is divided into the following sections

COVID-19 support

Furlough

According to the chancellor, unemployment will peak at 6.5%, which means down from a forecasted peak of 11.9% in July, 1.8 million fewer Britons are expected to be jobless than thought due to COVID-19.

The Furlough scheme got an extension until 30 September 2021.

Employees will get 80% of their wages until the scheme’s end date, but employers will be asked to put up 10% in July and 20% in August and September.

Visit our COVID-19 blog section to know about the range of pandemic-related updates and government-backed schemes.

SEISS

The COVID-19 Self-Employment Income Support Scheme (SEISS) has been extended until September too.

The 4th grant will cover February – April, worth 80% of average trading profits up to £7,500 in total.

The 5th grant will cover May – June, but the amount will depend on loss of income. Workers whose turnover has decreased by at least 30% can still apply for a grant for up to 80% of. Those whose income has decreased by less than 30% can apply for up to 30% of trading profits (averaged over 3 months).

SEISS Claims for the 4th grant can be made from April 2021, while claims for the 5th grant will start in July.

People who missed out on previous SEISS grants because they had recently started working for themselves or maybe some other reasons and completed tax return for 2019-20 will qualify for these new payments.

Taxation

Business Taxes

Owner-managed businesses and large international corporates will want to consider how the changes mentioned below will impact them.

  • The corporation tax will increase to 25% in April 2023.
  • The new small profits corporation tax rate of 19% will be introduced in April 2023.
  • A ‘super deduction of 130% will be introduced for capital investments in qualifying new plant & machinery.
  • The trading losses can be carried back for 3 years temporarily.

If your business is connected with innovations, then you must read our blog post related to R&D tax credits.

Capital Gain Taxes

  • The CGT annual exempt amounts of £12,300 for individuals and £6,150 for most trustees have been frozen up to and including the 2025-26 tax years.
  • The Inheritance Tax – the IHT nil-rate band and residence nil-rate band, will be unchanged at its present levels of £325,000 and £175,000 corresponding, until 5 April 2026.

Income Taxes

  • Personal allowance has been frozen at £12,570 from 2021-22 to 2025-26.
  • Basic and higher rate income tax thresholds will be frozen at £37,700 and £50,270, corresponding, from 2021-22 to 2025-26.
  • Pensions lifetime allowance frozen at the level of £1,073,100 from 2021-22 to 2025-26.

VAT and indirect taxes

  • The stamp duty land tax holiday on properties up to £500,000 will be stretched up by 3 months to 30 June 2021, then tapered off until 30 September.
  • From 15 July 2020, a temporary 5 percent reduced rate of VAT is effective for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions. The rate was subsequently extended until 30 September 2021, followed by 12.5 percent until March 2022.
  • The VAT registration threshold will remain unchanged at £85,000 until 31 March 2024.

Payroll and employee incentives

  • Reliefs for home office expenses, COVID tests and cycle exemptions have been extended.
  • The time limit exception for Enterprise Management Incentive schemes will be amended to ensure furloughed workers are not excluded.
  • Technical amendments will be made to the off-payroll working rules.

Low-carbon investment

  • The government of the UK will open a new national infrastructure bank in Leeds with £12bn capitalisations.
  • Green recovery bond will support the UK’s Green projects.
  • According to the chancellor, the Treasury will reform the Bank of England’s mandate to include targeting net zero emissions and the existing 2% inflation target.

Housing

  • The stamp duty holiday is extended.
  • The stamp duty holiday on the properties up to £500,000 continues until the end of this June. That will be kept at double its standard level till the end of September, and then return to usual levels from 1 October.
  • Mr Sunak confirms a mortgage guarantee to help first-time buyers access 95% mortgages.

Other measures

  • No rise in fuel or alcohol duties for the second year running
  • SMEs will be able to reclaim up to 2 weeks of eligible Statutory Sick Pay (SSP) costs per employee from the UK Government.
  • Retail, hospitality & leisure businesses will pay zero business rates for 3 months (to the end of June), then rates will be slashed for the remaining 9 months of the year by two-thirds.
  • Incentive payments for hiring new apprentices are being doubled to £3,000.