- Eleven Accounts
Spring Budget 2021
Never has a budget been so hugely anticipated. So much riding on this for basically everyone at the moment. Those who have been struggling due to Covid-19 affected industries hoping for more financial support and those doing well perhaps a little concerned they may be hit with a far greater tax bill.
I wanted to take a minute or two to pull out those bits affecting small to medium business owners right now. And to look at how we may be affected in the future.
Did taxes rise?
Well….. yes and no. Income tax has not risen. It remains at 20% above the tax-free allowance and 40% for higher tax payers. What has been announced is that there is to be a freeze on the tax thresholds until 2026. The tax-free personal allowance is usually raised every year in line with inflation, therefore paying tax on less of your income. With this staying fixed inevitably more tax will be paid as salaries rise over time.
>Tax-free allowance £12,570 per year until 2026
>Income tax will be charge at 20% for income above this threshold and up to £37,700. 40% tax on income £37,701 to £150,000. Additional tax rate 45% on annual earnings above £150,000
Corporation tax rise though!!!
Rishi could be up for an Oscar for best dramatic pause for this as we all collectively took a deep breath as he said; Corporation tax is to rise to 25%.
Again, yes, but…..
There will be the introduction of a small profits rate whereby businesses making under £50,000 profit will remain on a corporation tax rate of 19%. For those businesses making a profit between £50,000 and £250,000 a tiered tax rate will be applied with those businesses earning over £250,000 receiving the new elevated tax rate of £25%. This will come into effect from April 2023.
Seems to be all I talk about these days but its certainly a subject that keeps you on your toes.
>VAT threshold is to remain at £85,000 until April 2024
>5% reduced rate for hospitality is being extended until 30th September 2021, followed by a reduced rate of 12.5% for the following 6 months returning to standard rate for the next financial year.
Lasting a lot longer than ever expected furlough has been extended again until September 2021. Employees will continue to receive 80% of their salary for hours not worked until the end of June 2021. From Jul the government will introduce an employer contribution towards the cost of unworked hours of 10% in July, 20% in August and 20% in September.
The fourth SEISS grant will be worth 80% of three months’ average trading profits capped at £7,500. This will cover the period of February to April and can be claimed from late April. It will again be paid out as one lump sum.
Self-employed individuals must have filed a 2019-2020 tax return meaning many that were ineligible for the first three SEISS grants will now be eligible.
There will also be a fifth and final SEISS grant covering May to September. This will be determined by a turnover test. People whose turnover has fallen by 30% or more will continue to receive the full 80% of three months trading profits. People whose turnover has fallen by less than 30% will receive a 30% grant capped at £2850. This final grant can be claimed from July.
Obviously there are lots more elements to the budget but I just wanted to skim over the main points. I’m sure your finance professional will be more than happy to delve further with you for specific points for your business. If I can help in anyway, as always, you know where I am.