Main points from the budget (3 March 2021)

Posted on by Samantha Nicholson

Here are some of the key points from the budget of 3 March 2021:

  • Furlough and Self-employed grant extended until September.
  • Universal Credit uplift of £20 to be extended for a further 6 months.
  • Incentive payments of £3,000 for all new hires of any age.
  • Business rates holiday will be extended until June.
  • National insurance, income tax or VAT will not raise.
  • Personal tax threshold to be frozen until 2026.
  • Inheritance tax threshold, pensions lifetime allowance, annual exempt allowance from capital gains tax and VAT exemption threshold will also be frozen.
  • Duties for spirits, wine, cider and beer will be frozen for a second year in a row.

Business Support

Furlough

  • Furlough scheme will be extended until end of September.
  • For employees there will be no change, as they will continue to received 80% of their salary, for hours not worked.
  • Businesses reopen, they’ll be asked to contribute alongside the taxpayer.
  • Nothing will change until July when employers will contribute 10% in July and 20% in August and September.

Self-employed Income Support scheme (SEISS)

  • Self-employed grant will be extended until September.
  • Newly self-employed eligible for 4th and 5th grant, so long a they have filed their 2019/20 self assessment.
  • The 4th grant will be 80% of earnings and available to claim from late April.
  • The 5th and finial grant will cover June, July & August and be available to claim from July.  The value of this grant will be determined by a turnover test, meaning businesses will get different levels of support depending on how severely they are affected.

VAT

  • Hospitality and tourism will continue to enjoy a 5% reduced rate of VAT for a further six months

Other

  • Businesses will receive incentive payments of £3,000 for all new hires of any age.
  • Business rates holiday will be extended until the end of June, and then a two-thirds discount for the remainder of the tax year.
  • Restart grants of up to £6,000 for premises in April and up to £18,000 for firms that open up later.
  • £700m of funding is to be made available in the arts sector to help get them back on their feet.

Personal Tax

Please note that tax on income only refers to England and Northern Ireland.

Personal Allowance

  • The personal allowance will increase from £12,500 to £12,570 for 2021/22 and this will be frozen until April 2026.

Tax Bands and Rates for 2021/22

  • The basic rate of tax still remains at 20% and applies on taxable income up to £37,700.
  • The 40% tax band applies from £37,701 up to £150,000.
  • The additional tax band of 45% applies on income over £150,001.
  • The higher rate threshold will rise to £50,270 next year, but will then stay there until 2026.

National Living Wages (NLW) and National Minimum wage (NMW)

  • NMW & NLW will increase from April 2021 as follows:
    • 25 years and over increase from £8.72 to £8.91 per hour.
    • 21 to 24 years old increase from £8.20 to £8.36 per hour.
    • 18 to 20 years old increase from £6.45 to £6.56 per hour.
    • 16 to 17 years old increase from £4.55 to £4.62 per hour.
    • apprentices increase from £4.15 to £4.30 per hour.

Class 2 and 4 National Insurance Contributions

  • No increases to National Insurance.
  • Class 2 is £3.05 per week.
  • Class 3 (voluntary contribution) is £15.40 per week.
  • Class 4 lower profit limit is £9,568.
  • Class 4 upper profit limit is £50,270.

Dividends

  • The dividends allowance for 2021/22 will remain at £2,000.
  • Dividends received above the allowance will be taxed at the following rates:
    • 7.5% for basic rate taxpayers.
    • 32.5% for higher rate taxpayers.
    • 38.1% for additional rate taxpayers.
  • Dividends within the allowance still count towards an individuals basic or higher rate and so may affect the rate at which tax is paid on dividends above the dividends allowance. To determine which tax band dividends will fall into, dividends are treated as the last type of income to be taxed.

Marriage allowance

  • Introduced in April 2015, married couples and civil partners are eligible to transfer some of their personal allowance to there spouse/civil partner. The option is only available to couples where neither pays taxes at the higher or additional rate.
  • The allowance still remains at 10% of their personal allowance.

Rent-a-room relief

  • The relief still remains at £7,500.
  • Rent-a-room relief is available to individuals who let furnished accommodation in their only or main residence.

Business Tax

Corporation Tax

  • The current rate of corporation tax is 19% and will remain for 2021/22.
  • Corporation tax is planed to increase to 25% in April 2023, for businesses with profits of more than £250,000
  • The rate will be tapered between £50,000 to £250,000.
  • Companies with profits of less than £50,000 will remain at 19%, under a small profit rate of corporation tax.

Capital Allowances

  • The Annual Investment Allowance will be remain at £1 million in relation to qualifying expenditure incurred until 31 December 2021.
  • The Annual Investment Allowance will then revert back to £200,000 on 1 January 2022.
  • For the next two years, when companies invest, they can reduce their tax bill by 130% in a super deduction on qualifying new plant and machinery.

VAT

  • The registration threshold has been frozen at £85,000
  • The de-registration threshold has been frozen at £83,000 until April 2022.
  • 5% reduced rate of VAT will be extended until the end of September. Then it will be gradually increased, at 12.5% for six months, before returning to the standard rate from April 2022.

Employment Tax

Employment Allowance

  • The employers allowance is £4,000.

Off-payroll working (Private sector)

  • The changes to IR35 which came into effect in April 2017 for the public sector and was to be extended to the private sector from April 2020, but was postponed until April 2021.

Mileage allowance:

  • Mileage allowance remains the same at:
    • Cars and Vans up to 10,000 miles – 45p
    • Over 10,000 miles – 25p
    • Bicycles – 20p
    • Motorcycles – 24p

Capital Tax

  • Capital Gains Tax remains the same at 10% for any income taxed at the basic rate band and 20% thereafter. Higher rates of 18% and 28% apply for certain gains, such as disposals of certain residential property.
  • Capital Gains Tax annual exemption will increase to £12,300 for 2021/22.
  • The Inheritance Tax nil rate band remains frozen at £325,000.

Other

  • The Universal Credit uplift of £20-a-week will continue for another six months, the chancellor announces.
  • Working Tax Credit claimants will also be given more support for the next six months, with a one-off payment of £500.
  • Green projects will be supported through a green recovery bond.
  • The stamp duty holiday on properties worth up to £500,000 will be extended until the end of June.
  • Duties for spirits, wine, cider and beer will be frozen for a second year in a row.
  • Fuel duty will also be frozen.

This is meant as guidance only. No responsibility for loss occurred by any persons acting/refraining from action as a result of this information can be accepted by the Nicholson & Co (Sheffield) Ltd. It is always advisable to seek advice first.