Starting his Budget announcement yesterday, the Chancellor, Mr Sunak, detailed the “damage to our economy” caused by the coronavirus pandemic, affecting businesses and finances of the country “despite the unprecedented response”. He confirmed that the economy has shrunk by 10% but that more than £280 billion in support has been offered so far. He stated “I said I would do whatever it takes. I have done and will do so. It will take this country and the whole world a long time to recover from this extraordinary situation. But we will recover.” Below we have summarised the key points from the Budget relevant to our commercial and personal clients.
For Our Commercial Clients
The Coronavirus Job Retention Scheme (CJRS or the furlough scheme)
The furlough scheme has been extended until the end of September 2021. There will be no change for employees who will continue to receive 80% of their wage/salary for hours not worked until the end of the scheme. For employers, the scheme will continue as is until July when they will be asked to contribute to the cost of paying furloughed employees starting from 10% in July and 20% in August and September.
£100 million will be provided to HMRC to set up a taskforce to tackle Covid-19 fraud and tax evasion.
Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS)
A ‘loan recovery scheme’ will be introduced once the CBILS and the BBLS application deadline ends on 31st March 2021. The government will bring in a loan scheme for businesses to apply for funding between £25,000 and £10 million until the end of 2021 and the government will provide a guarantee to lenders of 80%.
VAT
The VAT registration threshold will remain at £85,000 until April 2026.
For the hospitality and tourism sector, the 5% reduced rate of VAT will be extended until the end of September 2021. From 1st October 2021 it will increase to an interim rate of 12.5% then back to the main rate six months later on 1st April 2022.
Business tax
Corporation tax rates will increase to 25% in April 2023. However, struggling businesses (i.e. loss-making business) will not be affected as they will usually not have a tax liability. In addition, marginal rates of tax will see a return as small businesses with taxable profits of £50,000 or less continuing to pay corporation tax at 19%. For taxable profits of £50,001 up to £250,000 a taper will be introduced. Therefore, only businesses with taxable profits of £250,000 or more will pay corporation tax at the full 25% rate.
For the next two years, the treatment of losses will be made more generous by allowing businesses to carry back losses of up to £2 million for up to three years.
There will be a ‘super deduction’ for businesses for the next two years where companies invest (further details are yet to be made available on this) which could allow a company to reduce their tax bill by 130% of the cost of the investment. The Chancellor provided a brief example of a construction company whereby under the existing rules it would buy £10 million worth of equipment which could reduce taxable income by just £2.6 million. With the ‘super deduction’, it could reduce taxable income by £13 million.
Business rates
100% business rates holiday for all eligible businesses in the retail, hospitality and leisure industry will has been extended with a 100% holiday for the first three months of the tax year until the end of June with up to 66% relief for the rest of the year. For closed businesses, rates will be discounted up to two thirds up to a value of £2 million for the remaining nine months.
Duties
The planned increase in alcohol duty for spirits, wine, cider and beer are cancelled. All alcohol duties will be frozen for the second year in a row.
No fuel duty increase.
Additional grants and funding
£700 million worth of grants will be made available in ‘restart grants’ to arts and sports organisations including £400 million to help arts venues in England (e.g. museums and galleries) to help them reopen, and a £300m recovery package for professional sports and £25 million for grassroots football.
A new ‘restart’ grant will be made available for non-essential businesses which will open according to the Prime Minister’s ‘roadmap’. Non-essential retail are due to open first so they will receive a £6,000 grant per premises. Those which will open later, such as hospitality and gyms, will receive grants up to £18,000 per premises to compensate those entities that are subject to a further delay in opening.
There will be funding available for apprenticeships of £3,000 for each new apprentice hired between 1st April to 30th September 2021.
Other information
There will be a new UK Infrastructure Bank set up in Leeds that will have £12 billion in capital (including for retail investors) to help finance the transition for ‘net zero’ by 2050.
For Our Personal Clients
Self-Employed Income Support Scheme (SEISS)
A fourth SEISS grant will be paid covering the period February 2021 to April 2021 (claimable (it seems) from late April). This will equate to 80% of the average trading profit for the three-month period up to a maximum of £7,500.
A fifth and final grant from May 2021 will also be paid and applications for the fifth grant will open in July 2021.
The SEISS grant will be based on the 2019/20 self-assessment income tax return information provided the taxpayer has submitted their 2019/20 tax return with HMRC by midnight on 2nd March 2021. This is expected to allow an additional 600,000 individuals who became self-employed last year to claim the fourth and fifth grants. Self-employed individuals whose turnover has fallen by 30% or more will continue to receive the 80% grant. Self-employed individuals whose turnover has fallen less than 30% will receive a 30% grant.
Personal taxation
The Chancellor did not raise tax or national insurance in his Budget. Personal tax thresholds will rise in April 2021 to £12,570 and will then be frozen at this level until April 2026. The higher rate threshold will increase in April 2021 to £50,270 and will remain at that level for the same period.
Thresholds for inheritance tax, pension lifetime allowances and capital gains tax will all remain at the same levels until April 2026.
Homebuyers
For homebuyers, the stamp duty holiday for properties with a value up to £500,000 will continue until 30 June 2021. It will then reduce to £250,000 on 1 July 2021 and will then return to its usual level of £125,000 on 1 October 2021.
There will be a new policy to stand behind homebuyers with a low deposit. Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a government guarantee on those mortgages. 95% mortgages will be offered from next month by many lenders and are scheduled to last until the end of 2022.
Lower paid and vulnerable individuals
For the lower paid and most vulnerable, the £20 uplift in the Universal Credit will continue for a further six months. This includes Working Tax Credits with a one-off payment of £500.
The national living wage for those aged 23 and over will increase to £8.91 in April 2021.
If you need support as a result of the Chancellor’s Spring Budget, please contact a member of our team – we’re here to help. Call 0161 905 1801 in Manchester or 01925 830 830 in Warrington, or you can email us via mail@lwaltd.com.