Budget 2021……whilst the tax hikes were not as many as forecast the actual tax take from the changes are significant, being the highest level since the late 1960’s. Also, as the Chancellor hinted, there may be more to come over the next few years to enable the books to be balanced in light of the recent, and continuing, funding provided by the government following the coronavirus outbreak.
As expected, the stamp duty land tax nil rate band of £500,000, which was due to finish at the end of this month, has been extended until the end of June, after which it will reduce to £250,000 until September 2021 when it will return to its previous level of £125,000.
The furlough scheme has been extended to September 2021, but with employers expected to contribute in August and September. Similarly, the self-employed scheme will also continue until September 2021 with tinkering to the current rules for the 5th grant, with the amount a business can receive based on how much it’s profits have been affected by COVID 19.
There was no increase in income tax, National Insurance or VAT, or the much-expected increase in capital gains tax rates to align them with income tax rates. Also no changes to inheritance tax.
Instead, there is a delayed increase in the rate of corporation tax to 25% with effect from April 2023 for companies with profits in excess of £250,000. For companies with profits less than £50,000, the “small profits rate” will remain at 19%, with a marginal rate of tax for companies with profits in between. As businesses are the ones that have benefited most from the government funding they are the ones that are expected to pay their fair share to reduce the deficit – his words not mine!!
From next month there will be a “super deduction “ of 130% for expenditure on plant and machinery to encourage businesses to put money back into the economy. Therefore, delaying any large expenditure on plant and machinery would be a very smart move. In addition, loss making companies will be able to carry back losses for up to 3 years, which is more generous than the current 1 year carry back.
In addition, business rates holiday for the hospitality, retail and leisure industry, will continue until the end of June at 100% reducing to 2/3rds for the following 9 months.
Individuals are not untouched, with a freezing of the personal allowance until April 2026 at £12,570, the higher rate tax band at £50,270 and the capital gains tax annual exemption at £12,300. These freezes means that in the coming years more people will be liable to pay tax, with many becoming higher rate taxpayers.
Other measures include cancellation of any petrol and alcohol duties (ready for all those summer parties once lock down ends!!!) and continued reduced rate of VAT for hospitality. Also retail and leisure restart grants of £6,000 per premises for retail and £18,000 for the hospitality and leisure industry, to help to get these businesses back in their feet, and grants of £3,000 for business that employ apprentices to try and reduce unemployment.
One does wonder whether the chancellor has done enough, and what further measures will be made over the coming years to recoup the funding. My guess would be that capital gains tax and inheritance are still very much on his radar !!!