Friday, March 5, 2021

The Budget - CJRS & SEISS

Coronavirus Job Retention Scheme

This scheme has been further extended until 30 September 2021. There will be no change to the amount payable to furloughed staff (80% up to a cap of £2,500 per month) but, from July, employers will be asked to make a contribution to the cost. This will amount to 10% in July and 20% in August and September.

Self-employment Income Support Scheme

It was announced in November that a fourth grant would be forthcoming under this scheme and this has now been confirmed. Eligibility for this grant (and the 5th instalment) will be based on the submission of the tax return for 2019/20 but otherwise on similar criteria to the previous tranches. The fourth grant will be 80% of average trading profits for 3 months up to a maximum of £7,500 - broadly in line with the payments under CJRS.

There will be a fifth grant, probably payable in July, covering the period from May to September. Not all the details are available but it appears that the maximum grant will be the same as before ie 80% of 3 months profits up to a maximum of £7,500. However this will only be payable to those businesses whose turnover has reduced by more than 30% between April 2020 and April 2021. If the reduction is less than 30% the payment will only be 30% of 3 months profits capped at £2,850. This seems, on the face of it, to be far less generous than the CJRS given that it only covers 3 months for a 5 month period and could be a much lower percentage.

The Budget - Personal & Business Tax

Here are a few highlights from the Chancellor's statement, we'll cover some of these in more detail once fuller information is available.

Personal tax

The personal allowance is determined for all of the UK and rises to £12,570 for 2021/22. The basic rate of tax for the UK remains at 20% with the higher rate of 40% kicking in at £50,270. Scottish rates start at 19% rising to 21% then up to 41% on income over £43,662. The difference is becoming quite noticeable.

The personal allowance will now be frozen until April 2026 as will the annual exempt amount for Capital Gains Tax (£12,300), Inheritance Tax thresholds, and pension allowances. Any inflation will erode the real value of these allowances probably by around 8-10% over the period.

Business tax

Corporation tax is to be increased to 25% from April 2023. This will not apply to companies with profits of less than £50,000 who will continue to pay 19%. There will be transitional relief for profits between £50,000 and £250,000.

There is a temporary adjustment to the rules for utilising trading losses incurred between 1 April 2020 and 31 March 2022. It will, in most cases, be possible to carry back these losses against profits of the previous 3 years, rather than the usual 1 year. This will apply to both incorporated and unincorporated businesses.

Purchases of new plant and machinery between 1 April 2021 and 31 March 2023 will qualify for capital allowances at a "super" rate of 130% instead of the usual 18% (or 100% if eligible for AIA). Items which would usually only qualify for a 6% WDA will get 50% instead.

The VAT threshold for registration is frozen at £85,000 until 31 March 2024. The current temporary rate of 5% for hospitality and tourism will stay until 30 September 2021 and will then rise to 12.5% until 31 March 2022.