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Spring 2021 Budget Highlights

08 March 2021 • HMRC News

Here is a review of the headline announcements together with a reminder of the measures coming into force immediately, from 6 April 2021 and beyond.

Measures introduced immediately

Temporary Stamp Duty Land Tax (SDLT) cut

The temporary increase in the residential SDLT nil rate band in England and Northern Ireland to £500,000 has been extended until 30 June 2021. The nil rate band will reduce to £250,000 between 1 July 2021 and 30 September 2021 before reverting to £125,000 on 1 October 2021.

Coronavirus Job Retention Scheme (CJRS)

The furlough scheme will be extended until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked up to a maximum of £2,500 per month and employer contributions are not required (except for NIC and pension contributions) until June 2021. From July, employers will be required to contribute 10% toward the cost of unworked hours and will increase to 20% in August.

Self-Employment Income Support Scheme (SEISS)

The government announced that the fourth SEISS grant covering February to April will be set at 80% of three months’ average trading profits capped at £7,500. This will be based on the tax return for 2019/20. The fourth grant will be paid in a single instalment and claims can be made from late April. The amount of the fifth and final grant covering May to September will be based on how much turnover reduced in 2020/21. If turnover falls by 30% or more the grant will be 80% of three months’ average trading profits capped at £7,500. If turnover falls by less than 30% the grant will be 30% of three months’ average trading profits capped at £2,850. The fifth grant can be claimed from late July.

Restart Grants

Non-essential retail businesses will be entitled a grant of up to £6,000 per premises and hospitality, accommodation, leisure, personal care and gym business will be entitled to a grant of up to £18,000 per premises.

Business Rates

The government announced that eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief until 30 June 2021. The period to 31 March 2022 will see a 66% discount, up to a maximum of £2 million per business, for properties that were required to be closed on 5 January 2021 or £105,000 per business for other eligible properties.

Annual Investment Allowance

This measure will temporarily increase the limit of the Annual Investment allowance (AIA) from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period 1 January 2021 to 31 December 2021.

Temporary VAT reduction for the tourism and hospitality sectors

The temporary reduced 5% rate of VAT for goods and services supplied by the tourism and hospitality sectors has been extended to 30 September 2021. The rate will rise to 12.5% between 1 October 2021 and 31 March 2022 before returning to 20% from 1 April 2022.  

Measures introduced from April 2021

Extended carry back of trading losses

The government will temporarily extend the period for which businesses can carry back trading losses from one to three years. This measure will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020/21 and 2021/22 for unincorporated businesses.

Super-deduction for plant and machinery

Additional relief will be available for qualifying expenditure incurred by companies between 1 April 2021 and 31 March 2023. Investments in new main rate assets will qualify for a 130% super deduction whereas investments in new special rate assets will benefit from a 50% first year allowance.

Off-payroll working (IR35)

Changes to the off-payroll rules were due to come into force on 6 April 2020 but this was delayed owing to the coronavirus pandemic. From 6 April 2021 all public sector authorities and medium and large private sector clients will be responsible for deciding if the rules apply and ultimately determining the worker’s employment status.

Inheritance tax nil-rate and residence nil-rate bands

The inheritance nil-rate bands will remain at existing levels until 5 April 2026.

Personal Allowance and basic rate limit

The personal allowance and basic rate limit will increase in line with inflation from 6 April 2021 to £12,570 and £37,700, respectively, but both will be frozen at this level until 5 April 2026.

Standard Lifetime Allowance

The standard lifetime allowance for pensions will be maintained at its current level of £1,073,100 for the tax years 2021/22 to 2025/26.

Taxation of SEISS grants

Future payments from the SEISS are to be taxed as income for the tax year in which they are received. Under the current legislation, a payment from the SEISS is taxed as income for the tax year 2020/21.

Measures introduced from April 2022 

VAT Thresholds

The current VAT registration and deregistration thresholds will remain unchanged for a period of two years from 1 April 2022 at £85,000 and £83,000, respectively.

Annual Exemption for Capital Gains Tax

The Capital Gains Tax annual exempt amount will be maintained at its current amount of £12,300 for individuals and personal representatives and £6,150 for most trustees of settlements between 2021/22 and 2025/26.

In the future

Corporation Tax

The rate of corporation tax will increase to 25% on profits over £250,000 from 1 April 2023. Companies with profits under £50,000 will continue to be taxed at 19%. Taper relief will be available for companies with profits between £50,000 and £250,000.

R&D Schemes

The government will consult to ensure that the UK remains a competitive environment for innovative research. This will include a decision on bringing data and cloud computing expenditure within the scope of the relief.

Interest harmonisation and penalties for late submission and late payment

The penalty regime for VAT and Income Tax Self Assessment (ITSA) will be reformed to target persistent non-compliance while being more lenient on occasional slip-ups. The reforms will come into force for VAT taxpayers from periods starting on or after 1 April 2022. The new regime will take effect for ITSA taxpayers who are required to submit quarterly updates though Making Tax Digital from accounting periods beginning on or after 6 April 2023. The new rules will apply to other ITSA taxpayers from accounting periods beginning on or after 6 April 2024.

“Warrener Stewart understands our business; they give us more than any other Accountancy service we have ever received in the past. They are extremely commercially aware and very current when it comes to changes in tax policy. ”
Diana Hoare - Anderson Hoare