2021 BUDGET UPDATE
2021 Budget: Key Take-outs
Chancellor Rishi Sunak today promised to “do whatever it takes” to improve the economy in his Budget speech, highlighting ‘huge challenges’ for the public finances with record borrowing at £355bn.
Off-Payroll tax wasn’t mentioned, but its implementation in April 2021 was confirmed, buried in the supporting documents.
“Any contractors or other businesses hoping for another delay will be disappointed, as will anyone looking for improved support for the incorporated self-employed,” commented Chris James, Director of Accounting Services. “But none was forthcoming – the improvements to the self-employed scheme do not apply to contractors working through PSCs.”
He continued: “Feared corporation tax rises aimed specifically at contractors did not appear, and the expected rise in the Corporation Tax rate (although significant) won’t take effect until 2023, and even then will have little or no effect on the vast majority of PSC users, due to the way it works (taper relief).
“Big business will bear the heaviest load there, although they may well also be buoyed by very generous tax reliefs for investment in the short term. New initiatives aim to help the unemployed back to work. Other business support schemes are also extended to give the economy time to recover post-lockdown.”
Changes to capital gains tax and ‘Entrepreneur’s Relief’ did not materialise. Income tax bands are frozen, but not until next year. Fuel and other duties will not increase for now, and stamp duty holidays are extended.
“Although the price of Coronavirus will have to be paid one way or another, the measures announced today are more of a gentle push towards the future than a short, sharp shock,” added Chris.
The good news was the Office for Budget Responsibility expects a swifter and more sustained recovery than previously expected with the economy returning to pre-Covid levels by mid-2022.
Here we highlight the key take-outs:
- Corporation Tax rules to change in 2023. Remain at 19% for companies with profits of up to £50k but companies with profits over £50k will be subject to tapering, with 25% rate introduced for businesses with profits over £250k.
- Small business grants will support digital growth, with the ability to claim 50% of the cost of software to improve productivity.
- A ‘super deduction’ tax incentive to encourage businesses to invest.
- More generous tax treatment of loss-making businesses.
- Access to grants for an additional 600,000 self-employed people.
- Universal Credit uplift of £20 per week to continue for a further 6 months.
- Grants and support for Covid-affected businesses under a new Restart grants programme and business recovery loan scheme extended.
- The furlough scheme has been extended to September and businesses will be asked to make a contribution from July onwards.
- National Living Wage will rise to £8.91 from April.
- Various schemes to help people obtain skills for work and new incentives for businesses to take on apprentices.
- Stamp duty ‘holiday’ on properties up to £500,000 to continue to the end of June 30th June. Nil rate band will apply to properties valued up to £250k to the end of September. Lenders can offer mortgages based on 5% deposits and receive government-backed guarantees.
- Income tax, National Insurance and VAT to remain unchanged.
- Freeze personal tax thresholds.
- Freeze of duty on alcohol and fuel.
- Launch of a UK Infrastructure Bank to support the green economy.