2021 Spring Budget
The Chancellor had what was accepted to be a near impossible balancing act to perform. He did so against a background of a 10% fall in GDP and record borrowing in peace time. He extended the Coronavirus relief in terms of CJRS - Furlough, SEISS, Business Rates relief and grants as anticipated. He also announced a number of green reliefs and other schemes. I will set out below the changes that I feel are most important.
- An increase from April 2023 in Corporation tax from 19% to 25% rather than the reduction to 17% promised when dividend taxes were increased in 2016.
- A reintroduction of the small profit rate of CT and marginal relief. When abolished in 2015 this applied to profits up to £300,000 but is now only the first £50,000 so a micro company rate really. This when combined with the dividend rate increase is a significant rise for small owner managed limited companies with a marginal tax rate of 26.5% on profits between £50k & £250K.
- A final point on the corporation tax rates is the impact for small groups of companies and the reintroduction of associated company rules where the above marginal relief will be divided by the number of companies.
- The new SEISS grants will be at different rates for those whose turnover has dropped by more than 30% compare to those who had not.
- The extension of the lower VAT rates for hospitality and tourism is welcome.
- The SDLT nil rate up to £500,000 was extended to June as predicted and will continue at the lower limit of £250,000 to the end of September.
- The tax losses will be able to be carried back three years rather than the normal one up until 31/3/22.
- Most rates and allowances were frozen meaning a real terms tax rise as no account for inflation.
- A new 130% deduction for investment in plant and machinery from 1/4/21 to 31/3/23 should increase business investment.
There are a number of other positive measures including the eight new freeports. However, it does appear that the approach to reducing the additional borrowing brought about by Coronavirus measures is by relying on significant growth and this leading to higher taxes on companies. History has shown this to be a risky strategy.
As ever the above is a summary of announcements not yet legislated for so no action should be taken without seeking clarification.