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All things Budget!

As the Chancellor searches the back of the sofa for some spare change to balance his budget or perhaps seeks out the magic money tree he planted in the Downing Street garden - see image - we are all left wondering how we are going to pay for the economic crisis COVID-19 has brought to our doorstep!


The Chancellor released the Budget on 3rd March 2021, as we all held out breath there weren't too many revelations.


See below for an informative summary, as produced by Nicola:


Self-employment Income Support Scheme (SEISS)

The eligibility for the fourth SEISS grant will take into account 2019/2020 tax returns filed before 02/03/21.

The criteria for the fourth grant is as before, but HMRC will base the fourth grant on the 19/20 tax return. So they will look at profits below £50,000, and trading income of at least 50% total income. If you are not eligible based on the 19/20 tax return, they will also look at the preceding 4 years.

HMRC will contact those potentially eligible from Mid-April, and applications will be open from Late April to Mid May.

The fourth SEISS grant will be 80% of 3 months average trading profits, capped at £7,500.

The fifth and sixth grants will only be eligible for those whose turnovers have had 30% reduction due to the effects of covid-19.

Coronavirus Job Retention Scheme (CJRS)

Furlough will be extended until end September 2021.

Employees will continue to be paid 80% of their unworked hours, but employers will need to contribute 10% towards this in July and 20% in August and September.

Any employees starting after November 2020 are eligible for furlough from1 May 2021, the date the new scheme commences.

The Job Retention Bonus has been abandoned.

Stamp Duty Land Tax (SDLT)

The temporary increase in the residential SDLT nil rate band in England and Northern Ireland to £500,000 has been extended until 30/06/21. It will then reduce to £250,000 to 30 September, and back to £125,000 thereafter.

Personal tax

In England, the personal allowance is set to increase to £12,570 for 2021/2022 (currently £12,500), and the higher rate tax band will rise to £50,270 (currently £50,000). Both of these will then freeze at these rates for the next 5 years to 05/04/2026. NIC upper profit limits will also be frozen at £50,270.

Currently, I do not know the Scottish thresholds and rates as these are set by the Scottish parliament.

Other taxes frozen to 05/04/26:

Capital gains tax (CGT) annual exemption for individuals - £12,300.

CGT annual exemption for trusts - £6,150.

Pension lifetime allowance - £1,073,100.

IHT nil rate band - £325,000 and £175,000 for residence. The residence tapering will continue for estates worth more than £2m.

Frozen to 05/04/22:

Savings income 0% band is frozen at £5,000.

Annual ISA subscription - £20,000.

Junior ISAs - £9,000.

Child Trust Funds - £9,000.

It was widely expected that CGT tax rates would increase this budget. The freeze in the annual allowance for 5 years does not mean that HMRC won’t increase CGT tax rates next budget!

Where an employer provides home office equipment directly, or any costs incurred by an employee are re-imbursed by the employer, there should be no benefit in kind as long as; this is generally available to all employees, it is to enable home working, and there is insignificant private use. If an employee buys their own equipment and this is not re-imbursed by their employer, this cannot be claimed against earnings. I have no more information on this as yet.

EMI share option conditions require an employee to work for 25 hours a week. This has been relaxed under the current climate.

There has also been an extension to the cycle to work scheme to the end of 21/22, so that the primary use of the bicycle does not have to be for journeys to and from work.

Businesses

Vat registration thresholds have been frozen to 31/03/2024 at £85,000, and deregistration has frozen at £83,000.

The temporary VAT rate of 5% for the hospitality sector has been extended to 30/09/21. From 01/10/21-31/03/222 it will be increased to 12.5%.

This applies to; catering (not alcohol), holiday accommodation and entrance fees to eg cinemas and parks.

Anyone who took advantage of the VAT deferral scheme last summer must either pay the full amount by 31/03/21 or contact HMRC to arrange to pay over 11 instalments. There will be a penalty of up to 5% for failure to do so.

The corporation tax for companies with profits under £50,000 remains at 19%.

The corporation tax for companies with profits over £250,000 will rise to 25% in April 2023. There will be marginal relief for companies with profits between £50,000 and £250,000, effectively providing a gradual increase in corporation tax rates from 19% to 25%.

Trading losses incurred between 01/04/2020 and 31/03/2022 for companies and 20/21 and 21/22 for sole traders can be offset by carrying back for 3 years. Loss relief can also be claimed midyear.

The government consultation into R&D reliefs has been extended and is now also including R&D reliefs into cloud and digital technology.

The off-payroll working rules for the private sector (IR35) will come into effect on 06/04/21.

Businesses with properties are able to claim grants. Non-essential retail businesses can claim up to £6,000. Hospitality, leisure and gyms can claim grants up to £18,000.

Super deduction

Companies that invest in plant and machinery between 01/04/21 and 31/03/23 will be able to claim a first-year allowance of 130%, with a 50% special rate allowance for integral features.

There are certain restrictions:

The asset must qualify for AIA or 18% capital allowances.

This only applies for plant and machinery.

The asset must be new.

Petrol, diesel and hybrid cars are not eligible, but fully electric cars will qualify.

Assets bought under HP have certain conditions to be allowable.

This only applies to companies, not to sole traders.

There will be a claw back of the super deduction if the assets are subsequently disposed of before 01/04/23.


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