After a tumultuous year, we approached the 2021 Spring Budget with some trepidation. The Chancellor was tasked with not disturbing what we hope will be an economic recovery this year, whilst at the same time starting to address the rather large black hole in the nation’s finances.

Would he start to raise taxes now, or would the more unpalatable decisions be deferred to a later date?   

We outline a summary of what was announced in the Spring Budget 2021.

Income tax

Personal allowance will be frozen at the level already announced for 2021/2022 and will then be frozen until 2026. So free pay will increase to £12,570 and then stay at that level until 2026.

The same applies to the higher rate band, the point at which higher rate tax becomes due. From 2021/2022, a higher rate tax applies to income in excess of £50,270, and that level will remain in place until 2026.

Self-employed support

There will be a fourth grant covering the period to April which is 80% of average profits.

There will be a fifth grant based on 80% of average profits for 3 months. For this grant, however, it is linked to turnover. For those whose turnover has fallen less than 30% due to Covid-19, they will receive a 30% grant. For those whose turnover has fallen more than 30% due to Covid-19, they will receive the full 80% grant.

For the newly self-employed, businesses who filed a 2020 self-assessment return can claim a fourth and fifth grant.

Capital Gains Tax

No changes announced.

Inheritance Tax

There is no change to the NIL rate band which remains at £325,000.

Corporation tax

There will be no immediate change to the rate of 19%. However, the rate will rise to 25% in 2023.

There will be a small profits rate of 19% for the first £50,000 of profits.

Above that level of profits, there will be a tapered increase up to the £250,000 profit level, above which the full rate will be payable.

VAT 

VAT registration level stays at £85,000 and the VAT rate at 20%.

VAT for the hospitality sector

The 5% reduced rate of VAT for the hospitality sector will continue until the end of September.

After that, there will be a reduced rate of VAT of 12.5% for the next 6 months. The rate will then revert to 20% in April 2022.

Furlough

Before the actual 2021 Spring Budget speech, Mr Sunak announced that the Furlough scheme would continue until September 2021. It had been due to close at the end of April 2021.

Employees will notice no change – they will be due 80% of their salary for hours not worked.

Employers will contribute 10% of their salary for July and 20% for August and September.

Restart Grant

A new ‘Restart Grant’ of up to £6,000 for non-essential retail will start in April.

Businesses like gyms and personal care, which will need to open later, will be able to claim up to £18,000.

Loans

A new Restart Loan Scheme will replace the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan schemes.

Businesses can apply for loans from £25,000 to £10 million up to the end of this year, with an 80% government guarantee.

Business rates

The 100% holiday will continue until the end of June and, after that, rates will be reduced for the rest of the tax year by two-thirds.

Stamp Duty

The £500,000 NIL rate band will now end on 30 June rather than 30 March. After that, the NIL rate band will become £250,000 until the end of September and, from October 1, the NIL rate band for Stamp Duty Land Tax (SDLT) will revert to £125,000.

Super-deduction

Instead of 100% AIA on investment, they can now deduct 130% of the cost.

Freeports

Plymouth becomes a freeport.

That is our summary of the 2021 Spring Budget for all those who were wondering about the key updates. If you have any questions about the above, you are always welcome to get in touch with us.