3rd March 2021
Following the Chancellor’s statement to the House of Commons in respect of the Budget for 2021, here is a summary of the announcements.
Coronavirus Job Retention Scheme (CJRS) – “Furlough Scheme”
The Furlough scheme will be extended until 30th September 2021. Employees will continue to receive 80% of their wages for the whole period. From 1st July 2021, Employers will only be able to reclaim 70% of the wages paid. (i.e. 7/8ths of the Furlough amount. So, for £80 Furlough paid, the business reclaim will be £70). From August 2021 this will be 60% or 6/8ths. Equivalent to £60 for every £80 paid. Calculations will continue to be based on hours not worked.
Self Employed Income Support Scheme (SEISS)
The self–employed grants will now be available to those who are newly self–employed and who have submitted a self–assessment tax return for the 2019/20 tax year by midnight on 2nd March 2021.
Grants will continue to be based on 80% of average profits for 3 months up to a maximum of £7,500.
Two further grants are available covering February to April 2021 (fourth grant) and May onwards (fifth grant).
For the fifth grant, you will need to again be able to prove that your income and profits have fallen. If your profit has fallen by 30% or more then you will receive the full 80% grant. If profits have fallen by less than 30% then you will only receive a 30% grant based on average profits.
The £20 per week Universal Credit uplift will continue for a further 6 months. The £2,500 surplus earnings threshold will continue until April 2022.
Working Tax Credits
An additional £500 one–off payment will be made to all eligible claimants to continue to provide extra support.
National Minimum Wage (NMW)
It was confirmed that the NMW rates will be as follows from 1st April 2021: –
- Main Rate for workers aged 23 and over – £8.91
- For workers aged between 21 and 22 – £8.36
- For workers aged between 18 and 20 – £6.56
- For workers aged under 18 but of school age – £4.62
- For apprentices – £4.30 (subject to the usual apprenticeship rules).
Additionally, the grant for taking on an apprentice will be doubled to £3,000.
A new restart grant will be available. This will be up to £6k for non–essential retail shops and businesses (per premises) and up to £18k for hospitality and leisure businesses.
An additional £700m will be made available for Arts, Culture and Sport venues.
The Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) will end on 31st March 2021 as planned.
A new Recovery Loan Scheme will be available from April 2021 with loans available from £25k to £10m for which the Government will guarantee up to 80% of the loan. A big change to the previous loan schemes is that the Government will no longer cover any of the interest charges this time.
The 100% business rates holiday will continue for retail, hospitality and leisure businesses until 30th June 2021. After then and for the remainder of the 2021/22 rate year there will be a 2/3 discount for these businesses.
The 5% discounted VAT rate for hospitality will continue until 30th September 2021 and then will be replaced with a 12.5% VAT rate until 31st March 2022.
The Stamp Duty Nil rate band extension will continue until 30th June 2021. The £500k limit will then be reduced to £250k up until 30th September 2021 and then revert to the usual £125k from 1st October 2021.
New Government backed 5% deposit mortgages will be available from April 2021. These will be available to everyone (not just first–time buyers) on purchases of properties up to £600k up until 31st December 2022.
New Covid Fraud Task Force
The intention is to add 1,265 new HMRC officers in order to purely check compliance with the various Covid grants and funding provided to businesses. This is likely to mean that almost every business will have their records checked for compliance and eligibility for all claims made.
The penalties for wrongful claims are significant and failure to repay incorrect claims within relevant time limits will be expensive. The penalty is 100% of the wrongful claim. That is equivalent to £2 for every £1 claimed.
The main areas for concern may be: –
- those claiming the SEISS grants when profits or turnover have not fallen.
- Claims for CJRS grants when all business taxes are not up to date. This includes VAT Returns and tax payments.
- Applying for and receiving a CBILS loan and BBL when only one is allowed.
- Applying for and receiving a higher BBL than entitled to (based on turnover).
- Claiming CJRS when staff are working. HMRC have the right to interview your staff when undertaking investigations. If you think you may have claimed any incorrectly, speak to your accountant immediately.
The main rate of Corporation tax will rise to 25% from 1st April 2023 for profits over £250k.
There will be a new Small Profits rate of 19% introduced for business with profits under £50k.
Marginal Rate tax will apply for profits between £50k and £250k.
A new “Super Deduction” has been unveiled for capital investments. This equates to 130% tax relief on the relevant capital expenditure which will be deducted from business profits. This will apply to qualifying purchases from 1st April 2021 to 31st March 2023.
There will also be a 50% first year allowance for some qualifying expenditure for special rate pool assets.
Income tax exemptions for Covid-19 tests and home office expenses
The Government has extended the exemption for employer paid Covid-19 tests and reimbursement of home office equipment.
The personal allowance will increase to £12,570 from April 2021 and then be frozen until 2026.
The basic rate income tax band will also increase to £50,270 and again be frozen until 2026.
The Primary Threshold and Lower Profits Limit will increase to £9,568 and the Upper Threshold to £50,270 and again be frozen until 2026.
Capital Gains Tax (CGT)
The CGT allowance will remain at £12,300 until 2026.