Summary of the UK Budget 2021
We have pleasure in sharing our summary of the Chancellor's UK Budget 2021.
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Chancellor Rishi Sunak presented his second Budget as the UK continues to face major economic uncertainly as a result of the Covid-19 pandemic. His statement attempted to strike a balance between providing support to the economy and protecting jobs as the lockdown restrictions continue, whilst recognising that taxes will need to rise to tackle the record levels of government debt.
Key measures from the Budget include:
- The main rate of corporation tax will increase to 25% from 1 April 2023. There will be a reintroduction of a small profits rate so that companies with profits below £50k will continue to pay tax at 19%. Companies with profits between £50k and £250k will pay tax at the main 25% rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate. It will be important that groups consider carefully how losses are used to avoid a possibly higher effective tax rate.
- Companies will be able to benefit from a new ‘super deduction’ on capital expenditure incurred from 1 April 2021 to 31 March 2023. Effectively a 130% capital allowance rate for qualifying expenditure on plant and machinery. Curiously not available to unincorporated businesses.
- All businesses will be entitled to carry back trading losses for three years as opposed to the current 12 months.
- ‘Fiscal drag’ is back! In line with Conservative manifesto commitments, income tax , NIC, and VAT rates remain unchanged. However, the personal allowance and higher rate threshold will be frozen from 2021/22 to 2025/26.
There was very little in the Budget around changes to capital taxes. The pre-Budget speculation about increases to CGT and a possible wealth tax did not materialise.
- The SDLT holiday on property up to £500k will be extended to 30 June 2021.
- The temporary 5% reduced rate of VAT for hospitality and tourism businesses will be extended by six months.
- The furlough scheme and support for the self-employed have also been extended.
One key date to look out for will be 23 March, so called ‘Tax Day’. We’ve been promised a number of consultations that will consider the longer term tax strategy of the UK. Consultations into the review of the EMI scheme and the operation of the R&D system of tax relief have already been announced and the Government will look at ensuring both schemes are achieving their intended respective purposes.
If you would like more detailed, one-to-one advice on any of the items raised in the Chancellor’s Budget speech, please do not hesitate to get in touch with our team.