Earlier today, Chancellor Rishi Sunak delivered his Spring Budget, as the UK continues to face the impact of the COVID-19 pandemic.
As anticipated, today’s statement attempted to strike a balance between recognising that taxes will need to rise, in order to repay the record levels of national debt resulting from the crisis, and the pressing need to support the economy and jobs as the effects of lockdown restrictions continue to be felt.
Over the coming days, we’ll share our full summary of the announcements and what they may mean for your business and personal finances. In the meantime, Tax Consultant Chris Sparkes provides initial thoughts on the matters most likely to affect our clients.
1. Furlough scheme and support for the self-employed extended
In one of the headline announcements, the closing date for the Coronavirus Job Retention Scheme (CJRS) has been extended from 30 April to 30 September 2021. From July, employers will be asked to bear 10% of the cost of the qualifying salaries of furloughed workers, rising to 20% from August.
The Self Employment Income Support Scheme (SEISS) will also be extended to 30 September 2021. A fifth and final SEISS grant will be made available, covering May to September.
Access to the scheme will also be widened to include the recently self-employed (providing they filed a 2019/20 tax return by midnight on 2 March), making an estimated 600,000 more people eligible for support. Further details, including application dates, are expected to follow in the coming weeks.
2. New support measures for businesses
£5 billion of new “restart” grants will be made available to businesses to help them reopen after the lockdown. Grants of up to £18,000 can be accessed by essential businesses and up to £6,000 for non-essential businesses.
A new Government-backed Recovery Loan Scheme will also be available to all businesses with loan values varying between £25,000 and £10 million, with an 80% Government guarantee for lenders.
3. Personal tax announcements
No changes were announced to the headline rates of income tax, NIC, VAT or Capital Gains Tax (CGT). The Inheritance Tax nil rate band, lifetime allowance for pension pots and CGT annual exemption also remain unchanged.
The income tax personal allowance will increase to £12,570 in April, but will then remain at this level until 2026. The threshold at which income tax is paid at 40% will go up to £50,270 from April, and will also remain at that level until 2026. These will both introduce tax rises by the back door as earnings increase.
4. Business tax announcements
As expected, the 100% business rates holiday has been extended to 30 June 2021. Business rates will then be discounted by two thirds for the rest of the year, subject to a cap in value.
As widely anticipated, the rate of corporation tax will increase to 25% from April 2023. The effect of this is softened by profits below £50,000 still being taxed at the current rate of 19%. The rate of corporation tax will taper, with the full rate of 25% being payable on profits above £250,000.
It was a surprise to learn that for two years from April 2021, companies (and unincorporated businesses) will be allowed to carry back losses of up to £2 million for three years, and a super-deduction of 130% will apply for the same period for investments in certain capital assets.
In a bid to support the troubled hospitality sector, all alcohol duties have been frozen. A planned increase in fuel duty has also been cancelled, which may reflect the perceived need to support people seeking to avoid the use of public transport to slow the spread of COVID-19.
To further support the hospitality sector, the 5% VAT rate will be extended to 30 September 2021. Thereafter, the rate of VAT will be 12.5% for six months, with the rate of VAT only returning to 20% from April 2022.
The Chancellor also announced that a system of freeports will be introduced to the UK which will offer a variety of tax and duty benefits. There will be eight in England, with one being present in each of the major regions of the country.
5. Property tax updates and new mortgage guarantee scheme
As anticipated, the Stamp Duty Land Tax (SDLT) suspension on homes worth up to £500K has been extended from 31 March to 30 June 2021. However, in an unexpected move, the nil rate band will then be doubled to £250,000 until 30 September 2021.
A Government-backed guarantee will be introduced to help banks offer 95% mortgages to all buyers of residential properties worth up to £600,000.
6. New clampdowns and consultations on the horizon
The Government announced that it will further clampdown on tax avoidance and evasion. As part of this, a Taxpayer Protection Unit with around 1,000 staff will be created to crackdown on all forms of fraud related to the various COVID-19 support programmes put in place.
We also know that HMRC will focus on attempts to avoid employment taxes through the abuse of IR35. More details on such issues will be made available shortly.
The Government also announced today that there will be consultations into the operation of the R&D tax credit system and the Enterprise Management Incentive scheme, to ensure that they are fully achieving their intended purposes.
How can we help?
If you need assistance or guidance regarding any of the changes announced today, please speak to your usual Lubbock Fine contact or get in touch.