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The "post covid age of optimism": Autumn Budget 2021

28/10/2021

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With the Autumn Budget being announced yesterday by Rishi Sunak, the chancellor's message was that we are in a "post covid age of optimism." 

But what does this mean to the likes of you and me, and how or will the changes effect us?

Rates and allowances
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While some Income tax rates will stay the same as we go into 2022/23, the 20% basic rate rises slightly by £270. There is no change to the current Scottish Tax Rates, as their budget will be published 9th December 2021, and there is no change to the Personal Allowance either. 

Rates and Allowances from 6 April 2022.

National Insurance

​From April 2022 the rate of National Insurance contributions across all classes (except class 2 and 3) will change for one year. The amount of the contribution will increase by 1.25% which will be spent on the NHS and social care across the UK. This increase in National Insurance contributions will apply to:

  • Class 1 (paid by employees)
  • Class 4 (paid by self-employed)
  • secondary Class 1, 1A and 1B (paid by employers).

Employers will only pay on earnings above the secondary threshold.

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Pensions

With effect from 6 April 2028 the earliest age at which most pension savers can access their pensions without incurring an unauthorised payments tax charge will increase from 55 to 57.
 
Capital gains tax annual exempt amount
(after personal allowance)

These are frozen at £12,300 for individuals and £6,150 for trusts.
 
Capital Gains Tax (CGT): property payment window

From 27 October 2021 the deadline for residents and non-residents to report and pay CGT after selling UK residential property increases from 30 days after the completion date to 60 days. This will be a welcome measure for taxpayers, giving them sufficient time to report and pay CGT.
 
Dividend allowance
​

The tax-free dividend allowance is unchanged at £2,000. The dividend tax rates are increased by 1.25% for each category of taxpayers for 2022 -23.

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​Directors loan accounts s.455 rate will also increase from April 2022, from 32.5% to 33.75%.


Corporation tax

The corporation tax rate will remain at 19% but from April 2023 the applicable corporation tax rates will be 19% and 25%. Businesses with profits of £50,000 or below will still only have to pay 19% under the small profits rate.
 
Enhanced capital allowances: super deduction
 

This introduces increased reliefs for expenditure on plant and machinery. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:
 
  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main-rate writing-down allowances
  • a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances
 
Annual Investment Allowance (AIA)

Annual Investment Allowance of £1m was due to end by December 2021. This will now be extended until 31 March 2023. Businesses will therefore have longer to consider bringing forward capital investments of between £200,000 and £1m, accessing upfront support by claiming tax relief on such costs in the year of investment.
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Rates 

Business rates in England will move to a more frequent revaluation cycle of every three years from 2023. A new temporary relief of 50% (up to £110,000) will be introduced for retail, hospitality and leisure properties in 2022/23. The rate multiplier will also be frozen for 2022/23.
 
Multipliers, revaluations and reliefs for the devolved nations remain subject to policy decisions by devolved governments.
 
From 2023 a new rates investment relief will be available to ensure qualifying property improvements do not result in a higher rates liability for a year following improvements, to support investments in green technologies, improvements to productivity and expansion of premises. 
 
Recovery Loan Scheme
 

The Recovery Loan Scheme is extended six months until 30 June 2022 for small and medium sized enterprises and from 1 January capped at a finance level of £2m per business with the government guarantee reducing to 70%.
 
Apprenticeship funding

In England, the government will continue to meet 95% of the apprenticeship training cost for employers who do not pay the Apprenticeship Levy. The £3,000 apprenticeship hiring incentive payment (per new hire) has been extended four months to 31 January 2022.
 
In Wales, apprenticeships are funded by the Welsh government, and apprenticeship incentive payments ranging from £1,500 – £4000 are available until 28 February 2022.
 
In Scotland, the type of funding you can access will depend on the type of apprenticeship. Additionally, the Adopt an Apprentice scheme provides employers with £5,000 for employing a redundant apprentice.
 
Making Tax Digital (MTD)

MTD for ITSA will be introduced from 6 April 2024. This impacts sole traders and landlords, with income over £10,000. General partnerships will not be required to join MTD for ITSA until 6 April 2025.

VAT

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The VAT registration and deregistration thresholds will not change for a further period of two years from 1 April 2022.
 
The reduced rate of VAT of 12.5% ends on 31 March 2022 for the hospitality sector returning to the standard rate of VAT of 20% from 1 April 2022.
  
Self-Employment Income Support Scheme
(SEISS) and other support


The amounts received through the support schemes are taxable income and is required as a separate entry on tax returns. 
 
Losses

Trading losses will have more flexibility to carry them back over three years. This applies only for losses incurred by companies for accounting periods ending between 1 April 2020 and 31 March 2022, and for individual for trade losses of tax years 2020/21 and 2021/22.
 
Cross-Border Group Relief (CBGR) and other related loss reliefs have been removed from 27 October 2021.
 
Entrepreneurs’ relief

The lifetime limit on gains eligible for entrepreneurs’ relief is £1m for qualifying disposals.
 
Employment allowance reform

The allowance is £4,000 but continues to be limited to employers with an employer NIC bill below £100,000 in the previous tax year.
 
R&D

SMEs applying for R&D tax credits will be eligible to a maximum of £20,000 in repayments per year plus three times the company’s total PAYE and NIC liability.

Inheritance tax (IHT)

The nil-rate band remains at £325,000 frozen until 2026. The residence nil-rate band for deaths in the following tax years are:
 
  • £100,000 in 2017/18    
  • £125,000 in 2018/19
  • £150,000 in 2019/20    
  • £175,000 in 2020/21
  • £175,000 in 2021/22 and subsequent tax years to 2026.
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Powers 

HMRC will have new powers relating to offshore tax avoidance schemes, allowing them to target the UK based entities which act as go-betweens. The rules would allow HMRC to impose additional penalties on UK facilitators, apply to the courts for freezing orders to prevent funds being dissipated and for winding up orders against companies or partnerships ‘operating against the public interest’. The rules also create a power to name promoters and share the details of their schemes. Although the powers would not come into force until Royal Assent, they can be used in respect of evidence or activities predating Assent.
 
New powers will also allow HM Treasury to make temporary modifications to support taxpayers in the event of a disaster or emergency of national significance including exempting benefits in kind and specified reimbursements or providing relief for specified expenses.
 
Time to pay

Taxpayers can set up a payment plan online via GOV.UK.
 
Pensions

The pension lifetime allowance will remain at its current level of £1,073,100 until April 2026.

​Interest relief for landlords

Landlords will be able to obtain relief as follows:

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Annual Tax on Enveloped Dwellings (ATED)
The ATED charge increases automatically each year in line with inflation (based on the previous September’s Consumer Prices Index).

More than £0.5m but not more than £1m
£3,800 in 2022/23 & £3,700 in 2020/21

More than £1m but not more than £2m
£7,700 in 2022/23 & £7,500 in 2020/21

More than £2m but not more than £5m
£26,050 in 2022/23 & £25,300 in 2020/21

More than £5m but not more than £10m
£60,900 in 2022/23 & £59,100 in 
2020/21

More than £10m but not more than £20m
£122,250 in 2022/23 & £118,600 in 2020/21

More than £20m
£244,750 in 2022/23 & £237,400​ in 2020/21

I hope this information has been useful to you, and if you have any questions at all don't hesitate to get in touch, or follow my social media for regular, up-to-date posts.

Join me on Facebook or follow me on Twitter.

[All information in this blog is correct at the time of writing and credit to ACCA]


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All you need to know about the 2021 Budget

25/3/2021

1 Comment

 
What are the key points from the 2021 Budget? Why is this one of the most important budgets we’ve had for years? How will the 2021 budget affect me?

On 3rd March 2021 the Chancellor, Rishi Sunak delivered one of the most important Budgets we've had for years, due to the impact the Coronavirus has had on our economy and many businesses. 

In this article, I will cover the key points from the 2021 budget, and then go into more depth on some of the points, to give you more of an understanding of how it may affect you, or your business in the coming months.

What are the key points from the 2021 Budget?
​
  • The furlough scheme has been extended.
  • A fourth and fifth SEISS grant will be coming this year
  • Stamp duty holiday extended
  • New mortgage scheme announced
  • Income tax rates frozen
  • Changes to corporation  tax
  • Contactless payment limit to rise
  • New Restart Grant
  • New recovery loan scheme
  • A freeze on pensions lifetime allowance, thresholds for capital gains tax and inheritance tax

I am employed but have been on furlough for some time now, how will the 2021 budget affect me?
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The furlough scheme has been extended. 

Originally due to end at the end of April, furlough will now run until the 30th September 2021. Employees on furlough will continue to get 80% of their salary for hours not worked, up to £2,500 per month. That will remain the case until the scheme ends. 

However, in July the state will only pay 70%, with employers expected to pay the remaining 10% of employee's reduced income, and in August and September the state will pay 60% and employers will have to pay 20%.

You can continue work part-time while on furlough or be furloughed full-time, as you can now.

I am self-employed, how will the 2021 budget affect me?

A fourth and fifth SEISS grant has been announced.

If you are self-employed, the fourth SEISS grant will be worth 80% of trading profits for three months, capped at £7,500. The value of the grants has varied since they were launched, but the next grant, which is supposed to cover February, March and April, will be worth 80%. 
​

However there are still unanswered questions over the detail - for example, exactly how average profits will be calculated and over which years. Applications for the fourth SEISS grant will open late April until the end of May for those eligible, an exact date hasn't been announced, but if you are eligible you will be contacted with a personal claim date.
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I wasn’t eligible for the SEISS grants previously, how will I know if I’m eligible now?

While previously you must have filed a tax return for 2018/19 to apply, it now says those who’ve filed a 2019/20 return may also be eligible – a move it says means over 600,000 more people may be able to apply. The Government says all other eligibility criteria will remain the same as the third grant.

When is the fifth self-employed grant coming and how will it be calculated?

The fifth SEISS grant, announced in the 2021 budget, its value will be linked to change in turnover covering May to September, and will be determined by a turnover test.
​
  • If your turnover has fallen by 30% or more.. you'll be able to claim the full grant worth 80% of three months’ average trading profits, capped at £7,500.
  • If your turnover has fallen by less than 30%... you'll be able to claim a grant worth 30% of three months' average trading profits, capped at £2,850.

The final grant can be claimed from late July and the Government says more info will be published in due course.
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How is the 2021 budget going to affect house buyers?

Currently in England and Northern Ireland there is a stamp duty holiday. This is now extended until the end of June. The holiday - which means buyers don't need to pay stamp duty on the first £500,000 of a property's purchase - had been due to end on 31 March. But it will now continue until the end of June. 

Following that, until September the point at which you start paying stamp duty will be cut to £250,000, before returning to the usual £125,000 after that.
 
How about first-time buyers?

A new mortgage scheme has been announced, to help buyers with a 5% deposit. So how does this work? 

If you have a deposit of 5%, you will be able to access 95% loan-to-value mortgages. This does not make a huge difference to the buyer, but does protect the lender more, as the scheme guarantees that if the lender lost money due to the borrower not keeping up with repayments, then the Government will cover some of this cost. 

The scheme will open in April 2021 and run until December 2022. 

For more information, check out this article from Martin Lewis, the Money Saving Expert:
https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/

How will my income tax be affected by the 2021 budget? 

After a rise this April income tax thresholds have been frozen, meaning in real terms many will pay more tax. 

The Chancellor said the Government would deliver on its promise to increase the personal allowance - the rate over which people start paying tax - to £12,570 next year, but said it would then stay unchanged until April 2026. 

The higher rate threshold will similarly be increased next year, to £50,270, but will then also be frozen until 2026. 

The pensions lifetime allowance and the thresholds for capital gains tax and inheritance tax will also be frozen until April 2026.
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How will corporation tax be affected by the 2021 budget?

Corporation tax on company profits above £250,000 is to rise in April 2023. This will see a rise from 19% to 25%.

However, if your profits are less than £50,000 the rate is to be kept at 19% (affecting around 1.5 million smaller companies.)

If your business falls in between these bands then a taper relief will apply.  

As a business I have been unable to open or trade during the pandemic, how will the 2021 budget affect me?

A new Restart Grant will launch in April to help businesses. 

The Restart Grant is to help businesses forced to shut to reopen again. Helping them through to June 2021. 

These will be available in England and will be worth up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.

The Restart Grant will replace the monthly Local Restrictions Support Grants for open and closed businesses. Both of these close at the end of March.

To find out if you’re eligible for Restart support and/or to apply, visit your local council’s website. 

​
https://www.local.gov.uk/our-support/guidance-and-resources/communications-support/digital-councils/social-media/go-further/a-z-councils-online
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What about business rates and VAT?

If you are in the retail, hospitality and leisure industry, you should have already have benefitted from a business rates holiday. This has now been extended until the end of June.

“For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.” - Rishi Sunak

The 5% reduced rate of VAT for the tourism and hospitality sector will be extended for six months. It will now last until the end of September, with an interim rate of 12.5% for another six months after that.

Is there any other help available for business?

A Recovery Loan Scheme. This will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. This will launch on 6 April and will be open to all businesses, including those who have already received support under the existing coronavirus guaranteed loan schemes.

What type of finance is available to my business? 
 
  • Term loans - up to 6 years
  • Overdrafts - up to 6 years
(available between £25,001 and £10 millions per business)

  • Invoice finance - up to 3 years
  • Asset finance - up to 3 years
(available between £1,000 and £10 million per business)

You must show that your business is/would be viable if not for the pandemic, that it has been impacted by the pandemic and that it’s not in collective insolvency proceedings.

If your business has received support from the existing loan schemes for Covid-19, as long as your business meets all the other eligibility criteria, you will still be able to access the finance from this scheme.

Is there anything else I need to know about the 2021 budget?
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The contactless payment limit will rise to £100, going up from the current £45. While this came in from 3rd March it may not be in all stores immediately, as they will need to update their systems.
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    Author

    Sonya Jolly qualified as a chartered certified accountant in 2000 and has over 20 years of general practice experience.

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