The UK Budget 2021 Highlights & Opinion

04 October 2021 - Chloe Wright

Budget 2021

UK public spending is at its highest for decades as a result of measures to support the country during the COVID-19 pandemic and Brexit. With the economy in a fragile state, the Spring Budget in March sought to strike a balance between stimulating economic activity, investing in protective measures and keeping a tight rein on tax rises.

As restrictions are lifted and business returns to a level of normality, this Autumn’s Budget statement is likely to take bolder steps to strengthen the UK’s finances as we plot the road to recovery. Read on to find out more.

When is the Budget in 2021?

The Spring Budget in 2021 took place on Wednesday 3 March. This statement had been deferred from November 2020 due to disruptions to the economy and unpredictability during the COVID-19 pandemic.

The next UK Budget announcement will be on Wednesday 27 October 2021, when the Chancellor will deliver his Autumn Statement. This followed much speculation that announcements would be deferred to the Spring Budget in March 2022.

Spring UK Budget 2021 highlights

The UK Spring Budget in March 2021 came at a crucial time for the country. After a year of lockdowns, the nation was keen to see a route out of the COVID-19 pandemic that could both keep businesses alive and people healthy.

With the fragility of the economy somewhat restricting the Chancellor’s options, he took cautious steps to stimulate activity while investing in protective measures and maintaining a balanced approach to tax rises and reliefs.

“Coronavirus has caused one of the largest, most comprehensive and sustained economic shocks this country has ever seen.”

– Chancellor Rishi Sunak

Personal tax and support

  • Income Tax rates remain unchanged
  • Slight increases to Personal Allowance, Marriage Allowance, Married Couple’s Allowance and Blind Person’s allowance
  • Extension of £20 increase in Universal Credit until 6 Oct 2021
  • One-off payment of £500 to eligible Working Tax Credit claimants for extra support until Oct 2021

Pensions & Savings

  • Taxes on personal savings and dividend income remain unchanged
  • Pensions Lifetime Allowance to be frozen for the next five years
  • Introduction of a new Mortgage Guarantee Scheme on homes valued up to £600,000
  • Extension of Social Investment Tax Relief for Venture Capital Schemes
  • Launch of a Green National Savings & Investment product, closely linked to efforts to tackle climate change.

Business

  • The Recovery Loan Scheme replaces previous Coronavirus Loan schemes, guaranteeing eligible loans between £25,000 and £10 million
  • Provision of Restart Grants of up to £6,000 per premises for non-essential retail businesses and up to £18,000 for various hospitality and personal care firms
  • Extension of the Self-Employment Income Support Scheme to September 2021, with provision for a fifth and final grant
  • Extension of 100% business rates relief for eligible retail, hospitality and leisure premises until 30 June 2021, followed by a 66% relief from 1 July 2021 to 31 March 2022
  • Extension of reduced rate of VAT (5%) for certain hospitality, hotel and holiday businesses to 30 September 2021, with a 12.5% rate for the following six months to 31 March 2022
  • Corporation Tax frozen until 1 April 2023, when it will rise to 25% for companies with profits over £250,000
  • Trade loss carry back extended to a period of three years, capped at £2 million
  • A new ‘super-deduction’ scheme for incorporated companies buying new plant and machinery between 1 April 2021 and 31 March 2023
  • Reduction in thresholds for first-year allowances for low-emission business cars
  • Freeport regulations relating to duty deferral, duty on processed goods and simplified import procedures
  • A tranche of tax allowances and reliefs for land purchases and developments within Freeport tax sites until 30 September 2026
  • Tax credits under the R&D Tax Relief scheme capped at £20,000 plus three times the company’s relevant expenditure on workers, with certain companies exempt

Employment

  • Extension of the Coronavirus Job Retention Scheme (JRS) to September 2021
  • Level of grant under the JRS to be reduced to 70% of wages from 1 July 2021, and further to 60% in August and September
  • Budget to fund work placements and training for people aged 16-24 increased by £126 million
  • Increase in payments to employers who hire new apprentices to £3,000
  • Creation of a £7 million fund to support portable apprenticeships
  • Clarification and minor technical changes to the off-payroll IR35 rules
  • Zero-emission vans within the van benefit charge will have tax nil-rated
  • Easement for employer-provided cycles exemption
  • Exemption of income tax on payments made to employees to reimburse costs of Coronavirus antigen tests
  • Extension of income tax exemption for home office expenses incurred due to COVID-19 restrictions
  • National Insurance Contributions rates remain unchanged
  • Minimum Wage and National Living Wage rates increased by around 1.5-2.0%

Capital taxes

  • Capital Gains Tax (CGT) annual exemption level remains unchanged for the next five years
  • Current rates of CGT remain unchanged
  • Inheritance Tax nil rate band and Residence nil rate band both frozen until 5 April 2026
  • Gift Hold-Over Relief amended to be unavailable where both parties are foreign-controlled or non-UK resident

Other matters

  • Duty rates on fuel, alcohol and tobacco remain frozen
  • Stamp Duty Land Tax (SDLT) nil rate band extended until 30 June 2021, after which time the nil rate band will be £250,000, until 1 October 2021, when it will return to £125,000
  • Changes to equivalent land transaction taxes in Wales
  • SDLT increased by 2% for purchases of property in England and N.I. by non-UK residents
  • Increase to contactless card payment limits

An expert second opinion

Chris George, Tax Advisory Manager at Scrutton Bland, gives his verdict on the key announcements from the March Budget and what they mean to you.

2021 Autumn Budget predictions

What is likely to be announced in the October Budget? While we typically don’t advise making decisions based on speculation, there are a few possible measures the Chancellor could take in the effort to get the UK’s public finances back on an even keel.

Removing the triple lock on state pensions

Average wage levels have seen an unusual increase in the last year, and increasing pension payments by the same amount could put a heavy strain on already stretched finances. The Work and Pensions Secretary announced in September that the triple lock on state pensions would be suspended for one year, but this may be extended or removed altogether.

Bringing Capital Gains Tax rates in line with Income Tax

Much touted ahead of the last Budget, but not actually enacted, the Chancellor (backed up by a report from the Office for Tax Simplification) is likely to create greater parity between the levels of taxes on income from employment and those on gains made from sale of assets and retained profits. Whether the rates will be exactly the same, though, remains open to debate.

Changes to the ‘basis period’ of tax reporting

With the upcoming introduction of Making Tax Digital for individuals, which will require the reporting of profits on a quarterly basis, the government are looking to ‘simplify’ matters by moving all self employment and partnership businesses onto a ‘tax year basis’.  This means that profits will being taxed in the tax year that they arise, rather than the current time lag between profits arising and needing to be paid.

Join us at the next Budget event

Grab your chance to see live reactions from our team of experts to all the Chancellor’s announcements, gain vital insights and share in the discussions at our next Budget Breakfast.

The well-established event takes place online from 8am – 10am on 28 October (the morning after the Budget), and is easy to book onto. We’ll also ask you for the address that you’re currently working from, so we can send you a small gift by post before the event.

After the event there will be a Q&A sessions with the presenters, so you can chat to them about any of the points raised in the Budget which may affect you and your business. All the   presentations will all be available to view on our website shortly afterwards.

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