By Pamela Phillips
Here are our hot takes on the 2021 budget and what it means for you as a UK agency business owner.
Corporation Tax rate is going up
Corporation tax is currently 19% and it will remain that rate until 1 April 2023 when it will go up to 25% for companies with profits over £250k.
The 19% will remain for companies with profits of £50k or less.
Companies that have profits between £50k and £250k will pay tax at 25% but this will be reduced by a marginal relief, which will mean their actual tax rate grows from 19% to 25%.
Furlough is being extended
The Coronavirus Job Retention Scheme (CJRS) is being extended to September 2021.
The level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the grant will be reduced and employers will have to contribute towards the cost of furloughed employees' wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
From July employers will contribute 10% of furloughed staff wages and from August they will have to contribute 20% of furloughed wages.
Employers will still need to pay employers NICs and mandatory minimum automatic enrolment pension contributions.
R&D tax relief is being capped
A limit to how much R&D can be paid in a single year will be introduced for accounting years that start on or after 1 April 2021. Payable tax credits will be restricted to £20,000 plus 3 times the company’s PAYE and NIC costs in the period.
This will have a bigger impact on companies that use subcontractors rather than employees to carry out R&D.
Capital Allowances super-deduction
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from a new super-deduction providing allowances of 130% on most new plant and machinery investments
Don’t run out and spend money yet though, wait until after the 1st to order those new laptops or you won’t be eligible.
Carry back losses
There will be a temporary extension of the period over which businesses may carry trading losses back for relief against profits of earlier years to get a repayment of tax paid for companies with year-ends between 1 April 2020 to 31 March 2022.
This is quite a technical point so definitely one that we’ll be flagging to you if you can benefit.
New Recovery Loan Scheme
From 6 April 2021, the Recovery Loan Scheme will replace CBILS and Bounce Back Loans which come to an end in March 2021.
The Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.
Increase in Minimum Wage
National Minimum and National Living wage to increase from £8.72 to £8.91 and will extend to 23 and 24-year-olds from 1 April 21.
Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.
Bike to work scheme
Under the bike to work scheme, employer-provided cycles must be used mainly for journeys to, from, or during work. However, this is being waived until April 22 for all employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.
While many were worried about changes to Capital Gains rates, in fact, no changes to the current CGT rates have been announced in the budget.
No change to capital gains tax rates, including the Business Assets Disposal relief (formerly known as Entrepreneurs Relief)
Personal Tax Rates
No changes to personal tax rates. In real terms, this will mean a reduction in take-home pay
Still no support for limited companies who have historically paid dividends rather than salary
Mortgage guarantee scheme
The government will introduce a new mortgage guarantee scheme in April 2021. This scheme will provide a guarantee to lenders across the UK who offer mortgages to people with a deposit of 5% on homes with a value of up to £600,000.
Under the scheme, all buyers will have the opportunity to fix their initial mortgage interest rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31 December 2022, is designed to increase the availability of mortgages on new or existing properties for those with small deposits.
Stamp Duty Holiday extension
Anyone trying to rush through a property purchase before the end of the tax year will be relieved that the temporary increase of the nil rate band to £500k has been extended to 30 June 2021 after which time it will drop to £250k until 30 September and then drop again to the standard amount of £125k from 1 October 2021.
What can you do?
- Furlough planning - review who needs to be on furlough and for how long, bearing in mind the cost of keeping an employee on furlough will increase from 1 July.
- Review your cash position, including any financing needs, to maximise your cash
- Review your investment plans - to take advantage of the 130% capital allowance super-deduction
- Review your salary for 2021/22 and advise your payroll processor if this needs to change.
Get in touch
If there is anything here that you would like to discuss further, please do get in touch.