The Chancellor, Rishi Sunak, delivered the Spring Budget on 3 March 2021 in what continue to be extraordinary circumstances. The key announcements from today’s Budget are summarised below. In addition to the Budget announcements, we are expecting the government to publish several important tax consultations on 23 March setting out its long-term taxation strategy.
- No increases in income tax rates, capital gains tax or inheritance rates.
- From 6 April 2021 the income tax basic rate limit will increase to £37,700 and the higher rate threshold will increase to £50,270. The personal allowance will increase to £12,570. These limits will be frozen until April 2026.
- The inheritance tax nil rate band of £325,000 and residence nil rate band of £175,000, as well as the pension Lifetime Allowance of £1,073,100 will be frozen until April 2026.
- The Capital Gains Tax annual exempt amount will remain at its current level until April 2026.
- The increased SDLT nil rate band for purchases up to £500,000 has been extended until 30 June 2021. This will decrease to £250,000 until 30 September 2021 and then return to £125,000.
- A new penalty regime for VAT (from 1 April 2022) and income tax (6 April 2023) will be introduced. The new points-based late submission regime will be introduced with a £200 penalty for every late submission and a revised regime for late payment of tax.
- The main rate of corporation tax will remain at 19% until April 2023.
- From April 2023 the main rate increases to 25%, with a Small Profits Rate of 19% for profits not exceeding £50,000. There will be marginal relief for profits between £50,000 and £250,000 (these thresholds are proportionately reduced for the number of associated companies and short periods). Family investment companies will not qualify for the 19% rate.
- Between 1 April 2021 and 31 March 2023, expenditure on new plant and machinery will qualify for a 130% super-deduction. Expenditure on assets in the special rate pool (such as integral features in buildings and certain cars) will benefit from a 50% first year allowance. The £1 million annual investment allowance limit for expenditure on plant and machinery will be extended until 31 December 2021.
- For the next two years the period over which businesses may carry back trading losses is temporarily extended from one to three years. The maximum carry back is for £2 million for each year.
- From 1 April 2021 the amount of SME payable R&D tax credits will be capped at £20,000 plus three times the company’s total PAYE and NICs liability.
- From 1 June 2021 withholding taxes will apply to payments of annual interest and royalties to EU companies subject to the terms of the relevant double tax agreement.
- The furlough scheme will be extended until 30 September with employees receiving 80% of their wages. Employers to contribute 10% from July rising to 20% in August and September.
- Two further payments will be made under the Self Employed Income Support Scheme (SEISS), with the payment in May based on 80% of average profits and a further payment in July. The newly self-employed who filed a 2019-20 tax return before today can claim these fourth and fifth SEISS grants.
- The off-payroll working (IR35) rules announced in Budget 2018 and delayed last year will go ahead from 6 April 2021 as planned.
- A £3,000 incentive in England for new apprentice hires until September 2021.
VAT and indirect taxation
- VAT registration threshold will remain at £85,000 until 31 March 2024.
- The 5% rate for hospitality, accommodation and attractions has been extended until 30 September 2021. This will increase to an interim rate of 12.5% until the end of March 2022 before returning to 20% from April 2022.