On Wednesday 3rd March, the Chancellor of the Exchequer, the Rt. Hon Rishi Sunak MP delivered the government’s Budget for 2021.
In his speech, the Chancellor announced extensions to a number of current COVID-19 schemes, alongside additional support for individuals and businesses, as the UK continues to navigate the impact of the pandemic, including extending the Coronavirus Job Retention Scheme until the end of September 2021, alongside other measures.
I have summarised the 10 COVID Relief measures all employers and business owners need to be aware of below, and also details about the tax rate changes and other related HMRC measures as a quick reference guide:
1. COVID-19 support
Extending the Coronavirus Job Retention Scheme (CJRS) until the end of September 2021: The UK government will continue to pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, up to the end of June 2021. For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875. Employers will need to continue to pay their furloughed employees at least 80% of their usual wages for the hours they do not work during this time, up to a cap of £2,500 per month. They also need to pay the associated Employer National Insurance contributions and pension contributions on subsidised furlough pay from their own funds. When claiming for periods from 1 May 2021 onwards, eligible employees must have been employed on 2 March 2021 and had a Real Time Information (RTI) submission to HMRC notifying a payment of earnings for that employee by their employer between 20 March 2020 and 2 March 2021. You can find out more about the CJRS on GOV.UK.
2. The VAT reliefs
The VAT deferral new payment scheme: The new payment scheme helps businesses with deferred VAT to pay what they owe in smaller, monthly instalments from March, interest free. The scheme is now open, and you can choose to make 2-11 monthly payments, depending on when you join. The later you join the fewer instalments are available to you. You can join through a simple online service without needing to contact HMRC.You need to join the scheme before the end of June.
VAT reduction for the UK’s tourism and hospitality sector: The government will extend the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
Wine and beer duties frozen: All duties on alcohol will stay as they are, for a second year in a row. These had been earmarked to rise
Cost of petrol duties unchanged: There has been a freeze on fuel duty for a decade and this will continue for at least another year. About 60% of the price you pay for fuel is tax - a mixture of fuel duty and VAT.
3. Income Tax exemption for employer-reimbursed coronavirus antigen tests for tax year 2020-21 and 2021-22:
This measure will continue the Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen. There will be no Income Tax liability for the employee or employer.
4. Continuation of the home office equipment expenses COVID-19 easement for the 2021-22 tax year:
An Income Tax exemption and corresponding NICs disregard were introduced for the 2020-21 tax year. This allowed employers to reimburse employees for the cost of home office equipment deemed necessary to work from home as a result of the COVID-19 outbreak free from Income Tax and Class 1 NICs. The exemption was due to end on 5 April 2021 but will now be extended to have effect until 5 April 2022.
5. Extended loss carry back for business:
To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses. Further details are available from your accountant.
6. Self-Employment Income Support Scheme fourth grant:
At the Budget it was confirmed that the fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. The fourth and fifth grant pay-out will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged.
Your eligibility for the scheme will now be based on your submitted 2019 to 2020 tax return. This may also affect the amount of the fourth grant which could be higher or lower than previous grants you may have received.
7. Low income and vulnerable households:
To help low income households Universal Credit uplift of £20 pw will continue for 6 months ending in September 2021
8. New Restart Grant:
A new restart grant in April will be available to help business’ re-open and get going again, for:
Non-essential retail - will open first and will receive a £6,000 grant per premises.
Hospitality and Leisure - will open later and will be impacted by higher restrictions and so will receive £18,000 per premises.
9. Saving green:
There will be a new savings product designed to raise money for environmental projects.
This "green bond" will be issued by the government-backed National Savings and Investments (NS&I), which has been criticised by savers and MPs for its customer service performance during the pandemic.
It will be issued in the summer, but there are no details yet on the interest rate that will be paid to savers.
10. New Government backed mortgage scheme
The chancellor confirmed that a government guarantee means first-time buyers should get a wider choice of mortgages that require a deposit of just 5% of the loan. This will be available when buying properties worth up to £600,000.
However, some potential homeowners may still find it hard to get a mortgage if they do not have a regular income, while getting into negative equity if house prices fall is a threat. The new products will be available from next month. However, while there is support for homeownership, there are no specific policies to help those behind on their rents.
Tax rate changes
Personal Allowance and higher rate threshold (HRT): The income tax Personal Allowance will rise with CPI as planned to £12,570 from April 2021 and will remain at this level until April 2026. The income tax HRT will rise as planned to £50,270 from April 2021 and will remain at this level until April 2026. The Personal Allowance applies across the UK. The HRT for savings and dividend income will also apply UK-wide. The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.
The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate.
In line with the increase in the main rate, the Diverted Profits Tax rate will rise to 31% from April 2023 so that it remains an effective deterrent against diverting profits out of the UK.
Pensions Lifetime Allowance:
The government will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.
Temporary increase in Stamp Duty Land Tax nil rate band for residential holiday:
This measure is part of the government’s strategy to maintain confidence in the housing market following the coronavirus (Covid-19) pandemic.
Stamp Duty Land Tax is a tax paid on the purchase of property or land in England and Northern Ireland. Last summer, the government temporarily increased the amount at which the tax is paid to £500,000, for property sales. The tax break was due to end on 31 March, but it will now end on 30 June.
After this date, the starting rate of stamp duty will be £250,000 until the end of September. Stamp duty will then return to the usual threshold and will be paid on property sold for more than £125,000.
The extension means anyone completing a purchase on a main residence costing up to £500,000 before 30 June will not pay any stamp duty. More expensive properties would only be taxed on their value above that amount.
The taper will make the transition back to its pre-pandemic levels at the September 2021 deadline feel less steep; the extension will come as "a significant relief to people who were stuck in the middle of the buying and selling process, watching time tick down towards the deadline..”
Annual Tax on Enveloped Dwellings (ATED) and 15 per cent rate of Stamp Duty Land Tax (SDLT):
ATED is only charged to Non-Natural Persons (NNP) owning a dwelling. A dwelling is a property that is:
Used all or in part as a residence or
Is in the process of being constructed or adapted as a residence.
Relief for Housing Co-Operatives: Following a consultation on draft legislation over the Summer of 2020, the government will introduce new reliefs from ATED and the 15% rate of SDLT for certain qualifying housing co-operatives. For SDLT, the relief can be claimed for land transactions where the effective date of the transaction is on or after 3 March 2021. For ATED, the relief will apply to chargeable periods beginning on or after 1 April 2020, allowing eligible housing co-operatives who have already paid ATED for that period to claim a refund. A tax information and impact note has been published on GOV.UK.
Business rates holiday
The retail, hospitality and leisure industries will have the 100% business rates holiday introduced last year extended until the end of June.
For the remaining nine months of the financial year after that, they will be discounted by two thirds, up to £2m for businesses that had to close due to the pandemic.
There will be a lower cap for those who have been able to stay open during the pandemic.
National Minimum Wage
The government confirmed that the National Minimum Wage would rise to £8.91 per hour. Further details in our article on the National Minimum Wage (NMW) and the National Living Wage (NLW).
Other HMRC related measures
OECD reporting rules for digital platforms: The government will consult on the implementation of the Organisation for Economic Co-operation and Development (OECD) rules that will require digital platforms to send information about the income of their sellers to both HMRC and the seller themselves. This will help taxpayers in the sharing and gig economy get their tax right, and help HMRC detect and tackle non-compliance.
The Van Benefit and Car and Van Fuel Benefit uprating for 2021: The government has announced that the van benefit charge and fuel benefit charges for cars and vans will be uprated by the Consumer Price Index from 6 April 2021.
Interest harmonisation and reform of penalties for late submission and late payment of tax: The government will reform the penalty regime for VAT and Income Tax Self-Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached. The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. The government will introduce a new approach to interest charges and repayment interest to align VAT with other tax regimes. These reforms will come into effect:
for VAT taxpayers, from periods starting on or after 1 April 2022
taxpayers in ITSA with business or property income over £10,000 per year from accounting periods beginning on or after 6 April 2023
all other taxpayers in ITSA, from accounting periods beginning on or after 6 April 2024.
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Letha Charles – Founder & Director
L Charles Accounting Limited