In line with the rest of the year between March 2020 and March 2021 this budget is unusual in that it was a platform for Coronavirus relief measures as well as the usual announcements which surround direct and indirect taxation changes. I have split this post into two sections, the first covering the ongoing Coronavirus relief for businesses, with the second covering changes to taxation.
Coronavirus Job Retention Scheme
The scheme will continue to run in it’s present form until the end of June 2021. That is directors and employees who are on furlough will receive at least 80% of their normal pay and the employer can claim a grant for 80% of the wages paid. The employer continues to be responsible for paying National Insurance Contributions and Pension Contributions.
From the 1st July 2021 the amount of the grant will be reduced by 10%, so the employer will be able to claim 70% instead of 80% but the employee will still receive 80% or more of their normal pay for hours not worked
From the 1st August 2021 until the end of September 2021, when the scheme is due to cease, the grant will be reduced by 20%, so the employer will be able to claim 60% instead of 80% with the employee still receiving 80% or more of their normal pay for hours not worked
Self-employment Income Support Scheme – SEISS
This scheme will continue until the end of September 2021, with the newly self-employed being able to claim provided that they have filed their 2019/2020 tax return by midnight on the 2nd March 2021.
The fourth SEISS grant, like the previous three, will be worth 80% of three months average trading profits capped at £2,500 per month. This will be paid in a single lump sum (a maximum of £7,500 in total).
The grant will cover the period from 1st February to the 30th April 2021. A date for making the claims has not been set, but has been announced for late April onwards.
There will be a fifth grant to cover the period 1st May to the 30th September. Unlike the previous grants this grant will be subject to turnover reduction. Turnover that has fallen by 30% or more will continue to receive the 80% as for the previous grants. However, with this grant, if turnover has fallen by less than 30% the grant will be reduced to 30% capped at £2,850 for the three months.
This final grant can be claimed from sometime in late July.
VAT reduction for the hospitality sector
The VAT reduction for the hospitality sector of 5% will continue until 30th September 2021. From the 1st October 2021 until the end of March the rate will increase to 12.5% before returning to the full rate of 20% in April 2022.
Business Rates Relief
The retail, hospitality and leisure industry have received 100% business rate relief for 2020/2021 and will continue to receive 100% business rates relief from 1st April 2021 to 30th June 2021. The sector will then receive business rate relief of 66% from 1st July 2021 to 31st March 2022.
Business Restart Grants
Under this scheme non-essential retail businesses will receive grants of up to £6,000 per premises and hospitality and leisure businesses will receive up to £18,000.
These will be administered by the Local Authorities and will replace the monthly Local Restrictions Support Grants which will close at the end of March. These currently pay £667 every 2 weeks for businesses forced to close.
Capital Allowances – Super-deduction for plant and machinery
For the next two years businesses investing in new plant and machinery will receive a first-year capital allowance of 130%. This is instead of the Annual Investment Allowance which would give relief of 100% for capital purchases of up to £1 million in the year of purchase.
The current rate of 19% will continue until 2023. From 2023 the 19% will continue to apply to small companies with trading profits of less than £50,000. For companies with trading profits of between £50,000 and £250,000 there will be a tapered rate between 19% and 25%. Companies with trading profits in excess of £250,000 will pay the full rate of 25%.
Income Tax and National Insurance thresholds
The personal tax allowance will rise to £12,570 (an increase of £70) from the 6th April 2021. But this allowance will then be frozen until 5th April 2026.
The 20% rate of tax will apply to the first £37,700 above the personal allowance. 40% will apply to earnings over £37,700 up to £150,000 with 45% applicable to earnings over £150,000.
National Insurance thresholds
Employees and Employers
Lower earnings limit – pay above this level counts as contributions towards a State Pension and other benefits but no payment is required – £6240 per annum
Primary threshold – pay above this limit attracts National Insurance Contributions of 12% for the employee as well as the 13.8% employer contribution – £9568 per annum
Secondary threshold – pay above this limit attracts National Insurance Contributions of 13.8% for the employer – £8840 per annum
The first £4,000 of the Employers Contributions during the year is covered by the Employers Allowance for those employers who qualify for the allowance.
Class 2 National Insurance Contributions are payable when profits reach £6515 per annum, they can be paid voluntarily if profits are below this level. Class 2 NICs count towards the number of years contributions for a State Pension and are the cheapest way of making voluntary contributions so this should be a consideration when deciding whether to make voluntary contributions when profits are low as may well be the case for many businesses affected by the Coronavirus Pandemic. The rate is £3.05 per week.
Class 4 Contributions are payable when profits reach £9568 per annum. The contributions are payable at 9% on profits above the threshold.
As always, should you have any questions we would be pleased to hear from you.
Koreen can be contacted on 07531741287 and her e-mail address is firstname.lastname@example.orgShare