As restrictions continue to ease and businesses return to more normal trading, the Budget may have passed many by.
Understandably much of the Budget focused on the continuing impact of the pandemic on businesses and the economy. The Budget included the extension of the furlough and self-employed support to the end of September. Although the level of support will be reducing, many businesses and those who are self-employed will welcome this continued support at a time when they might not be able to trade at pre-pandemic levels.
An important change to the fourth Self-Employed Income Support Scheme (SEISS) grant is that this will now take into account income from the 2019/20 tax year. This means that those who commenced self-employment after 5 April 2019 and were previously excluded from support can now apply. As with the previous grants, there are various conditions which must be met including that profits must be less than £50,000 and less than the total of other income. To claim there must be a significant reduction in trading profit between February and April 2021 due to reduced business activity, capacity, demand or inability to trade due to coronavirus.
A fifth and final SEISS grant will cover the three months May to September. The amount of this grant will be determined by how much turnover has been reduced in the year April 2020 to April 2021. If this reduction in turnover is 30% or more, the grant will be 80% of three months' average trading profits, capped at £7,500. Where turnover has reduced by less than 30% the grant will be 30% of three months' average trading profits, capped at £2,850.
With all SEISS grants, it is important that these claims are correctly made. HM Revenue & Customs have indicated they will recover any grants which have not been correctly claimed.
For those in hospitality, the 5% VAT rate on certain sales will be extended until September which will be very welcome as those businesses continue to get back on their feet.
Although there was no immediate increase in taxes there was an early warning that the rate of Corporation Tax would be increasing from the current rate of 19% to 25% from April 2023. Although this new rate will not apply to companies with profits of less than £50,000 and will only apply in full on profits of more than £250,000, this very large increase in rates will lead businesses to look at their tax affairs and maximise the reliefs available.
For limited companies, there will be a new super-deduction on the purchase of plant and machinery. This means that for qualifying purchases made between 1 April 2021 and 31 March 2023 130% of the cost can be deducted from trading profit. This increases the tax deduction from 19p per £1 spent to 24.7p per £1 spent. An important condition of this deduction is that the assets must be bought new.
For individuals, there is no increase in tax rates, but personal allowances and the point at which higher rate tax becomes payable will be frozen at April 2021 levels until 2026. This will lead to higher tax bills as income increases in the coming years.
House buyers will be pleased to hear that the Stamp Duty holiday on the purchases was extended from March until the end of June. This holiday means that no Stamp Duty is payable on purchases of less than £500,000, a saving which could be worth up to £12,500. I expect this will lead to many purchases taking place before 30 June.
There were also plans to support first-time buyers secure mortgages with low 5% deposits. These mortgages are starting to be offered by some lenders, although these lenders will continue to apply their own lending requirements.
Overall, the Budget did not introduce any significant changes to taxation and support will continue to be offered to businesses as we come out of the pandemic. Most expect this to be a temporary situation and that taxes will have to increase in the coming years. You can read our full Budget Statement Summary here.
For professional advice, guidance, or support please contact our team.