CORPORATION TAX RISE TO 25% FROM APRIL 2023
Let’s start with the worst news first. In a bid to rebalance the books post COVID, Rishi Sunak announced a rise in the Corporation Tax rate to 25% from April 2023 which was higher than expected. Companies making profits up to £50,000 per annum will continue to pay 19%, with those with profits over £250,000 paying 25%, and the rate for companies with profits of £50,000 to £250,000 being on a sliding scale between the two.
PERSONAL ALLOWANCE AND HIGHER RATE TAX THRESHOLD FROZEN FOR 5 YEARS
The Chancellor also announced that the new personal allowance of £12,570 which arrives in April 2021 will be frozen for 5 years until 2026. Alongside this the higher rate tax threshold, which will see a small increase to £50,270 from April 2021, will also be frozen until April 2026. As salaries rise to keep pace with cost of living this means more and more people will be pushed into higher rate tax.
FURLOUGH SCHEME EXTENDED UNTIL 30 SEPTEMBER 2021
In better news, the Coronavirus Job Retention Scheme has been extended to 30 September 2021, although businesses will need to contribute 10% of the 80% wages paid to furloughed workers in July, and 20% of their 80% wages in August and September 2021. In addition, businesses will need to continue to fund the Employers NIC and pension costs for furloughed employees.
SELF EMPLOYED INCOME SUPPORT SCHEME FURTHER GRANTS CONFIRMED
The Chancellor confirmed that there will be two further three-month grants for self-employed taxpayers once again set at 80% of past profits, and capped at £7.5k. In a welcome step, both grants will be made available to newly self-employed individuals, providing they have filed a 2019/20 Self Assessment tax return. However, for the fifth and final grant covering May to September 2021, your turnover must have reduced by at least 30% to get the full 80% grant, with a lower level grant of 30% of past profits for those whose income has fallen by less than 30%, capped at £2,850.
SUPER-DEDUCTION FOR COMPANIES INVESTING THEIR RESERVES FOR 2 YEARS
Rishi Sunak announced that from April 2021 until March 2023 a super-deduction will be offered to any companies that invest in new equipment, by allowing 130% of what they invest to qualify for tax relief (currently 100% but subject to limits). As a result, companies will obtain 24.7% Corporation Tax relief on the purchase of new plant and machinery for 2 years.
VAT CUT FOR HOSPITALITY & LEISURE SECTORS EXTENDED
The current much needed VAT cut to 5% for the hospitality and leisure sectors was due to end on 31 March 2021, but the Chancellor announced earlier today that it will be extended until 30 September 2021, after which it will be increased to 12.5% until 31 March 2022.
STAMP DUTY LAND TAX CUT EXTENDED
The current £500,000 threshold for Stamp Duty on residential properties that was due to end on 31 March 2021 has been extended to 30 June 2021. After this the usual threshold of £125,000 will be temporarily doubled to £250,000 for a further 3 months up until 30 September 2021.
VAT, CAPITAL GAINS TAX, PENSIONS & INHERITANCE TAX THRESHOLDS ALSO FROZEN
Alongside the freezing of the tax-free personal allowance and higher rate tax thresholds, the Chancellor also announced that the VAT registration threshold will be frozen at £85k for 3 years, while the Capital Gains Tax annual exemption of £12,300, the pensions Lifetime Allowance of £1,073,100, and the current Inheritance Tax thresholds will be frozen for 5 years until April 2026.
TAX RELIEF FOR LOSSES EXTENDED TO ALLOW 3 YEAR CARRY BACK
In a bid to help businesses adversely affected by COVID, the usual rules that allow a business to carry back losses for one year have been amended to allow losses made in the 2020/21 and 2021/22 tax years to be carried back and offset against profits in the previous 3 years. Alongside this the usual cap on losses that can be carried back of £50,000 has been increased to £2 million.
BUSINESS RATES RELIEF FOR RETAIL, HOSPITALITY & LEISURE EXTENDED
The current business rates holiday for certain sectors including retail, hospitality and leisure has been extended to 30 June 2021, as expected, with a 2/3rds discount then applied for 9 months up until 31 March 2022, to allow businesses in these sectors time to recover. Nurseries will also qualify.
NEW RESTART GRANTS FOR HOSPITALITY, LEISURE, GYMS & NON-ESSENTIAL RETAIL
£5 billion has been pledged to fund new Restart Grants which provide a one-off cash grant of up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses in England. Grants of up to £6,000 per premises will also be available to non-essential retail businesses.
NEW RECOVERY LOAN SCHEME ANNOUNCED
With the current Bounce Back and Coronavirus Business Interruption Loan Schemes due to end soon, a new 80% government backed Recovery Loan Scheme has been announced offering loans between £25k and £10 million to support businesses through the next stage of their recovery. This will be open to all businesses, including those who participated in the existing COVID loan schemes.
