I have covered the Covid related budget highlights on my Covid page (
https://www.amandalodgeandco.co.uk/resources/covid-19-links-to-helpful-websites). Here are the main taxation and business investment points. All in all, not much has changed yet. Investment is being encouraged and there are some tax rises in the future, but I think most of us were expecting that. We will have to pay for all the Covid support at some time, lets hope businesses can prosper and it won't be too painful.
Personal Tax
Most personal tax allowances increase slightly for 2021/22 but are then fixed until 5 April 2026, meaning that inflation will erode their value over time. For example, the tax-free personal allowance will be £12,570 from 5 April this year (up by £70) and remain at that level for 4 years. The next £37,700 of income will be taxed at 20%, up from £37,500.
Savings bands, the additional rate threshold, and the £100,000 income level at which the personal allowance starts to be eroded all remain the same. In addition, rent-a-room allowance, trading income, property income allowance, and dividend income allowance all stay the same.
Business Tax
Trading losses (up to a maximum of £2m) arising in 20/21 and 21/22 can now be carried back up to three years. This extends the current one year carry back and could be especially useful to struggling businesses, to get maximum benefit you need to get your accounts done quickly after the year end so any claims for tax refunds can be made.
Corporation tax is to rise for companies with larger profits, but not until April 2023. There will be a £50,000 profit band that will be taxed at the current rate of 19%, the next £200,000 will be taxed at an effective rate of 26.5% assuming profits are less than £250,000. This will be achieved by all the profits being charged at 25% and then “marginal relief” will be granted. If company profits are over £250,000 then they will all be taxed at 25%. Thresholds will be reduced for short periods and where there are associated companies – so splitting your company up won’t work!
From April 2021 Super-deduction for capital expenditure will mean that 130% of qualifying expenditure on new main rate plant and machinery will be available and 50% on special rate assets. The £1m temporary annual investment allowance will remain in place until 31 December 2021.
Payroll
The national minimum wage is to increase to £8.91 from April 2021, so check rates if you pay close to or at the current minimum wage.
Other business development announcements
The government has also announced further grants under their “Help to Grow” service https://helptogrow.campaign.gov.uk/ which teaches skills and aims to help businesses take advantage digital technology.
Conclusion
I feel that this budget should have relatively little negative impact in the coming tax year. The details above only cover a few highlights that I feel will be applicable to many of my clients. As always tax can be quite individual so if you need any more detailed advice please feel free to get in touch.