Highlights from the Chancellor’s March Budget: UK Economy
Highlights from the Chancellor’s March Budget – In the Chancellor’s second real Budget on 3 March 2021 he announced that he had to level with people about the state of the UK economy. Prior to Budget day there were fewer leaks than normal about possible tax changes. There were however announcements prior to Budget day of grants for High Street businesses and the hospitality sector and the widely predicted extension of the furlough scheme.
Highlights from the Chancellor’s March Budget: CJRS Furlough Scheme and Self-Employed Income Support Grants Extended
Highlights from the Chancellor’s March Budget: The current version of the furlough scheme that started on 1 November 2020 was scheduled to end on 30 April 2021. In order to avoid a “cliff-edge” with resulting widespread redundancies the chancellor has announced a further extension of the scheme and also a phased reduction in support to employers. The CJRS furlough grant for May and June will remain at 80% of the employees’ usual pay for hours not working but it will then be limited to 70% for July and then 60% for August and September. In line with the further extension of the CJRS furlough scheme for employees the chancellor has also set out further support for the self-employed. We had been waiting for the details of the calculation of the fourth SEISS grant covering the period to 30 April and we now know that the support will continue to be 80% of average profits for the reference period capped at £2,500 a month and can be claimed from late April. There will then be a fifth SEISS grant covering the 5 months to 30 September.
The UK corporation tax rate is currently one of the lowest rates of the G20 countries and the government states it is committed to keeping the rate competitive. That should have the effect of encouraging companies to remain in the UK and companies to set up here. With other countries considering raising corporate tax rates the chancellor has announced that the UK will follow suit and consequently the rate will increase to 25% from 1 April 2023 where profits exceed £250,000. However, where a company’s profits do not exceed £50,000 the rate will remain at the current 19% rate and there will be a taper above £50,000. Businesses will however be able to take advantage of new tax breaks to encourage investment in equipment and an enhanced carry back of losses.
Super Deduction for Investment in New Equipment
In order to encourage companies to invest in new capital equipment the chancellor announced a radical new “super-deduction” of 130% where they invest in new plant. This would mean that when a company buys plant costing £10,000 they would qualify for a £13,000 deduction in arriving at business profits. The new deduction, which will run for two years from 1 April 2021, will not be available for motor cars. Certain assets such as fixtures in buildings will only qualify for 50% relief in the first year instead of the normal 6% writing down allowance.
• Three year carry back of trading losses
• 5% VAT rate for food, attractions and accommodation extended
• VAT registration limit frozen at £85,000 until 1 April 2024
• Making Tax Digital extended to all VAT registered businesses from 1 April 2022
• New grants for high street businesses and hospitality sector
• SDLT thresholds extended
• 5% mortgage schemes extended
• Apprenticeship schemes extended
Please contact us if you would like to discuss further. As you develop your 2021 business strategy, you will most likely identify some actions that you can undertake with certainty, which will help you to manage some of the risks that are inherent in operating in uncertain economic times. Perhaps you can bolster your firm’s cash reserves, reduce fixed costs, or negotiate better terms with suppliers. By proactively focusing on delivering against these actions, you will keep moving your business forward, which will help to make your firm more resilient in the medium to long term.