With one of the most anticipated Budgets in the decades, people up and down the country have had their eyes peeled on the recent announcement of the Budget 2021. After a year of uncertainty and financial constraints, the government had to produce a budget to help the many, whilst balancing the books. Here at AME, we have taken the main points from the announcement and analysed it below:
- SEISS Grants 4 & 5 will be made available to those who filed their 2020 personal tax returns by 2nd March 2021.
- Furlough scheme confirmed to be extended to the end of September.
- 100 % business rates holiday until June. With a 66% discount for the reminder of the year.
- Hospitality & tourism retain a VAT reduction at 5% to the end of September, thereafter an increase to 12.5% for 6 months.
- Extended loss carry back – To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years.
- Stamp duty NIL rate band on house purchases below £250k.
- Corporation tax will increase to 25% from April 2023 on profits over £250K. Rates will be tapered however, with all profits below £50,000 remaining at 19%.
- The VAT registration threshold of £85,000 will remain unchanged for 2 years.
- The Personal tax allowance of £12,570 form April 2021 will remain in place along with the higher rate threshold of £50,270, until April 2026.
- NIC’s thresholds will remain unchanged alongside tax allowances, form April 2021. The Primary threshold being £9,568 from April 2021.
- Alcohol and fuel duty will remain frozen for another year.
- R&D relief for SME’s for accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability, in order to deter abuse.
- The Super-deduction, from 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance.
- The Recovery Loan Scheme introduction: From 6 April 2021 the Recovery Loan Scheme will with a government guarantee of 80% on eligible loans between £25,000 and £10 million, will be open to all businesses.
- Restart Grants introduction: ‘Restart Grants’ in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
Making everyone happy was never going to be an easy job, whilst balancing the books after record government borrowing. Our view is, the Budget 2021 doesn’t go far enough to protect and help the SME’s. Whilst the introduction of the Small business corporation tax rate being kept at 19% and furlough extended is welcomed, many of these businesses of profits under £50,000 are owner managed businesses and as such, that have been taking out remuneration via dividends for tax efficiency. This has resulted in their income not being covered by any grants that government has failed to address. This, coupled with the Personal allowance freeze, will impact everyone’s take home pay.
We do believe the Super-deduction and loss carry back to be a great addition however. One would hope to see increased investment that was seen in America, when similar taxes we’re introduced as well, which in our view, supports all the new and old entrepreneurs out there and will boost further Start-ups and new innovation. Whilst we would have liked to see Corporation tax remaining stagnant or indeed, even reducing for all, the increase in Corporation tax for higher profit companies may remain a stumbling block for potential investment.
Lastly, we recommend looking through the recent budget announcement with caution. A lot of policies come into effect in years to come and it is certainly not unheard of for the goalposts to be moved.
You can find more details via https://www.gov.uk/government/publications/budget-2021-documents .
For more on this or anything else, do not hesitate to contact us here at AME for a free consultation.