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.
