Frequently Asked Business Question:
Can you tell me what were the key announcements made in last week’s Budget by the Chancellor, Rishi Sunak?
This year’s Budget announcements were a mixture of continued direct support for the duration of the covid crisis, measures to boost and support recovery once the lockdown is over, and tax increases in a number of guises. Notable (temporary) tax incentives include a two-year 130% super-deduction and a corporation tax loss carry-back measure allowing qualifying losses to be carried back for up to three years. By freezing various rates and allowances, the chancellor relies on ‘fiscal drag’ across income tax allowances, the VAT and IHT thresholds, the pensions lifetime allowance and the CGT annual exempt allowance to raise almost £22bn in additional revenue – and all without breaking the Conservatives’ ‘triple lock’ manifesto commitment.
The rise in the corporate tax rate is the largest tax rise in the Budget, generating north of £17bn per annum by the end of the Parliament, almost 60% of the total revenue raised.
The real question now though is whether this is enough or whether we will hear more plans for tax increases on consultation day on the 23rd March.
Key Budget highlights include:
- The main rate of corporation tax will be increased to 25% from April 2023 for companies with profits of at least £250,000. At the same time, a new small companies’ rate of 19% will apply to companies with profits of up to £50,000.
- For the two years from April 2021, companies investing in qualifying new plant and machinery will benefit from a 130% first-year capital allowance.
- The personal allowance will rise to £12,570 and the higher rate threshold will be £50,270 for 2021/22 and both will then be frozen for the next four years.
- The capital gains tax annual exemption, inheritance tax rate nil rate bands and pensions lifetime allowance will all be frozen at their current levels until April 2026.
- The exemption from stamp duty land tax on the first £500,000 of residential property value will be extended to 30 June 2021 and then replaced by a £250,000 exemption until 30 September 2021.
- The coronavirus job retention scheme will be extended in full until 30 June 2021 and will be phased out over the following three months.
- The self-employed income support scheme will also be extended at its current level with a fourth grant covering the period February to April. A fifth grant will cover the period May to September, but this will be at a lower level for those who have seen less than a 30% drop in turnover.
- The business rates holiday for retail, hospitality and leisure businesses will be extended for three months and will then be reduced to a 66% relief until the end of March 2022.
For more information and/or assistance, please contact our Tax Team who will be pleased to help you.