Chancellor Rishi Sunak has unveiled Budget 2021 in the House of Commons.
The UK economy shrank by 10% in 2020.
700,000 persons have lost their jobs since the Covid-19 pandemic began.
As expected, there are new measures to help businesses, significant changes to corporation tax, and a future freeze on personal allowances and tax bands, and additional support under COVID-19.
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Here are the main points:
1. No Increase in Income Tax, Capital Gains Tax, National Insurance & Inheritance Tax
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Personal tax allowances will increase from next year to £12,570 and the the higher rate tax threshold will increase to £50,270 before it will be frozen until April 2026.
There is no increase to the CGT Annual Exemption, so this will remain at £12,300, meaning that only capital gains over this amount each year will be taxed.
The inheritance tax threshold remains the same and unchanged at £325,000. Tax is charged at 40% over this amount.
2. Corporation Tax to Increase to 25% in 2023
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Currently, the rate of corporation tax that all companies pay on their taxable profits is at a rate of 19%.
From April 2023 the rate of corporation tax will increase to 25%. However, companies with profits of less than £50,000 will continue to pay tax at 19%, to be called the ‘small profit rate’.
Companies with profits of up to £250,000 will have tapered and hybrid corporation tax rates from 19% to 25%.
Only Companies with profits over £250,000 will pay the new 25% tax rate, which is just 10% of all UK businesses.
The Government have announced a new incentive for businesses who invest in new equipment etc (capital allowances). Currently most companies can claim 100% of the purchase of this equipment but under the new scheme called ‘Super Deduction’, this will allow all business to claim 130% of the cost of purchase.
3. VAT Cut for Hard Hit Sectors Extended for 6 Months
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The 5% VAT rate for the hospitality sector is to be extended until 30th September 2021. From 1st October 2021 until 31st March 2022 there will be an interim rate of 12.5% in this industry sector. From 1st April 2022 the rate will revert to the standard rate 20%.
The VAT registration threshold of £85,000 will remain at that level for the next two years.
4. Furlough Scheme Extended Until September 2021
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As expected, the Furlough Scheme for companies supporting their employees in these difficult time, the support and claims to carry on until September 2021.
Similarly, the Self Employment Income Support Scheme has been extended until September with a 4th claim shortly covering February, March and April, and then a 5th and final claim later in the year in July. For those who were newly self employed in 2019/20 and missed out on the first three Support Claims, provided that the individual filed a Tax Return for 2019/20 by the end of February, then they will be entitled to claim under the 4th and 5th claims.
This is a good news for the retail industry as further grants of up to £6,000 per premises are available. For gyms and other similar industries opening later in the year compared to other non essential retail, grants of up to £18,000 per premises are available.
5. Stump Duty Holiday Extended for 3 Months Until the 30th June 2021
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The Stamp Duty holiday that was due to end on 31st March 2021 has been extended by 3 months and will now end on 30th June 2021.
6. New Policy to Stand Behind Homebuyers: A Mortgage Guarantee
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New 95% mortgages to become readily available with many high street lenders already signed up to the scheme. This is available to all, not just first time buyers but borrowing will be capped to £600,000.
7. Planned Increase in Alcohol Duties Frozen
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All duties on Alcohol have been frozen. The planned increases in duties for spirits like Scotch whisky, wine, cider and beer, will all be cancelled.
8. Planned Increase in Fuel Duties Cancelled
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The proposed fuel duty increase has been cancelled.
Meanwhile, contactless payment limit will rise to £100 later this year. The minimum wage is set to increase to £8.91 an hour from April 2021.
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