What is being extended in 2021?
Mortgage Squared bring you a simple guide to the March 2021 Budget that was announced.
The well awaited second budget was delivered by Chancellor Rishi Sunak on the 3rd of March 2021. Below we have highlighted what may affect the self-employed and small business owners.
Furlough scheme extended
In advance of the budget, the Chancellor announced the extension of the furlough scheme until the end of September 2021. Workers will continue to receive 80% of their current salary for hours they don’t work because they’ve been furloughed.
The support will be provided by a grant to their employers. Employers will need to make a contribution of 10% of the worker’s salary for unworked hours in July, and a 20% contribution in August and September. The £2,500 monthly limit for the grant remains in place.
There was no announcement of any further support for small, limited company directors who take most of their income through dividends and can only claim a small amount (or even nothing) on the CJRS scheme.
COVID – 19 support for businesses extended
The announcement included the extension of the existing measure the government have in place. There are also some new measures that are being put forward to help the economy through the coronavirus pandemic.
Newly self-employed measures
There are new measures to help the newly self-employed through the Self-Employed Income Support Scheme (SEISS) and existing scheme extended to a fifth round.
The scope of the SEISS grant has been extended, and the fourth grant under the scheme will now be available to individuals who began self-employment in the 2019/20 tax year, as well as those who have previously claimed.
The fourth grant will be available in April. Those that are eligible will be able to claim the fourth round of SEISS at 80% of the average trading profits capped at £7,500 for three months. There will then be a fifth grant that will cover May, June, and July – which will likely be available over the Summer.
If unfortunately, your turnover has fallen by 30% or over, you will receive the full 80% grant. If it has fallen by less than 30% the grant will then be reduced to 30%.
To be eligible for the fourth grant, and for new entrants to the scheme, you must have filed a Self-Assessment tax return for the 2019/20 tax year by midnight on 2nd March 2021. All other eligibility criteria will remain the same as the third grant. Further details will be published in due course.
Previous grants (applications for the third grant closed on 29th January 2021) have involved a taxable grant worth 80% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.
New Restart grants to help businesses reopen in England
New ‘Restart Grants’ to help businesses in England reopen when lockdown begins to ease from April 2021 were announced:
- Non-essential retail businesses will receive grants up to £6,000 per premises.
- Hospitality and leisure, including personal care and gyms, which are more impacted by restrictions and may not open until later in the year, can each receive grants of up to £18,000.
More measures to help businesses re-open are in discussion and are expected to be announced in due course.
Recovery Loan Scheme
The Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans. This will be on those loans between £25,000 and £10 million. The scheme will start form the 6th of April. It will be open to all businesses, including those that have already received support under the current COVID-19 guaranteed loan schemes.
Business taxes and allowances
- Corporation Tax to increase for larger companies
- Corporation tax rates will remain at 19% for business profits up to £50,000. This will be managed accordingly with an increase to a main rate of 25% for profits over £250,000 from April 2023.
The VAT cut to 5% will remain in place until the end of September for the hospitality and tourism industries. It will then rise to 12.5% for another six months before returning to the full 20% rate in April 2022. No other changes are being made to VAT.
Business investment tax relief and loss relief for businesses
A new “super-deduction” tax relief was announced for businesses to reduce their tax bill by 130% of what they spend on investment. The Chancellor also announced the extension of the normal loss carry-back rules from one year to three years for losses of up to £2 million. This will enable tax repayments to be claimed, providing relief and cash flow support for businesses.
Annual Investment Allowance (AIA) Extended
In November 2020, the government announced the extension of the AIA’s temporary £1 million cap until the end of 2021. No other changes were announced.
Business rates reliefs
Eligible retail, hospitality and leisure properties in England will continue to receive 100% business rates relief from 1st April 2021 to 30th June 2021.
This will be followed by 66% business rates relief for the period from 1st July 2021 to 31st March 2022, capped at £2 million per business for properties that were required to be closed on 5th January 2021, or £105,000 per business for other eligible properties.
Nurseries will also qualify for relief in the same way as other eligible properties.
The apprentice hiring incentive in England was extended to September 2021 and the payment increased to £3,000. A flexi-apprenticeship scheme was also announced that will allow apprentices to work with multiple employers in a sector.
Statutory Sick Pay
Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee from the government.
Research and Development
A consultation will commence on the Research and Development tax credit regime.
Help to grow programme
Up to 130,000 companies in UK will be eligible for the new Help to Grow scheme. The new programme aims to help small and medium sized businesses to learn new skills, reach new customers and boost their profits.
Personal Tax, Allowances and Savings
The basic personal tax-free allowance will increase to £12,570 from April 2021, and then it will stay at that level until 2026. The higher rate threshold increasing to £50,270 and will then also be frozen to 2026.
In the 2021/22 tax year the new National Insurance thresholds are:
- Primary Threshold/Lower Profits Limit increases to £9,568.
- Upper Earnings Limit (UEL)/Upper Profits Limit increases to £50,270.
National Minimum Wage
It was confirmed that the National Minimum wage will raise to 38.91 per hour.
Currently £325,000 which will be maintained up to 2026.
Pensions Lifetime Allowance
Currently at £1,073,100 and will be maintained till 2026.
Capital Gains Tax
Currently at £12,300 and will be maintained at that level up to 2026.
The band of savings income that is subject to the 0% starting tax rate will remain at its current level of £5,000 for 2021-22.
The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.
The annual subscription limit for Junior ISAs and Child Trust Funds for 2021-22 will remain unchanged at £9,000.
IR35 – planned changes for the private sector will come into force on 6th April 2021
As expected, there was no further news concerning the implementation of the IR35 changes in the private sector. The Chancellor resisted industry pleas for further delaying the introduction and the new rules will now apply from 6th April 2021.
Alcohol and Fuel Tax
Duty on alcohol and fuel continues to be frozen for the next 12 months. The planned increases have been cancelled.
The Chancellor announced that the stamp duty holiday for the first £500,000 Nil Rate Band of the purchase price will continue until the end of June. From 1st July 2021, the Nil Rate Band will reduce to £250,000 until 30th September 2021 before returning to £125,000 on 1st October 2021.
New Mortgage Guarantee Scheme from April 2021
It will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of just 5% on homes with a value of up to £600,000. Under the scheme, all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to.
This scheme will be available for new mortgages up to 31st December 2022. It will increase the availability of mortgages on new and existing properties for those that have small deposits.
Mortgage Squared’s team of knowledgeable advisers will be happy to help you take advantage of this new scheme and any other queries you may have. Call us today on 08081 551 807.