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In a typically assured performance, Chancellor Rishi Sunak presented his second Budget on Wednesday 3 March 2021. Here, UNW have summarised the key announcements and their tax implications.

With the various impacts of coronavirus uppermost in everyone’s minds, much of his speech was devoted to detailing various measures to continue support for individuals and businesses through the current lockdown, then to encourage and assist the subsequent recovery.

He also talked about the immense impact of all this on the public finances, both on the deficit in the current 2020/21 and following 2021/22 financial years, and on the accumulated national debt, which is expected to peak at around 110% of GDP in 2025. The Chancellor then announced a number of measures to start to address this, principally freezing many tax allowances for several years and a deferred increase in corporation tax. Whether this will be sufficient remains to be seen (more tax rises may well be required later – while no changes to Capital Gains Tax (CGT) rates were announced, last year the Chancellor commissioned a report by the Office for Tax Simplification on CGT, which includes how this interacts with Inheritance Tax).

As well as changes announced recently, this summary includes measures previously announced, but only coming into effect from April 2021 or later. These include:

Personal Taxes

  • the personal allowance and basic rate band for Income Tax will both increase slightly for 2021/22 and then be frozen until 2025/26

Business Tax

  • Corporation Tax (currently 19%) will increase to 25% for companies with profits over £250,000 (remaining at 19% Small Profits Rate for profits up to £50,000, with tapering between)
  • a temporary increase in the carry-back period for up to £2m of trading losses from one year to three years
  • a new ‘super-deduction’ of 130% for companies investing in new plant and machinery between 1 April 2021 and 31 March 2023
  • a number of Freeports were announced and the related incentives
  • extension of the temporary 5% reduced rate of VAT for the hospitality sector

Capital Taxes

  • Capital Gains Tax annual exemption and Inheritance Tax nil-rate band both frozen until April 2026
  • extension of the period for the current temporary increase in the Stamp Duty Land Tax nil rate band for residential property in England and Wales (with some tapering)

Other measures

  • a new Recovery Loan Scheme (to replace existing loan schemes coming to an end)
  • a new mortgage guarantee scheme
  • an extension to the Job Retention Scheme
  • a Self-Employment Income Support Scheme fourth and fifth grant
  • an extension to the business rates holiday in England

Previously announced tax measures about to come into effect include:

  • a cap on the amount of R&D tax credit paid to a loss-making small or medium-sized enterprise
  • new rules apply to off-payroll working payments made for services provided on or after 6 April 2021

You can read UNW's full summary of the Budget 2021 via the link below:

https://www.unw.co.uk/wp-content/uploads/2021/03/UNW-Budget-2021-Summary.pdf

Ashleigh Smith
Article by Ashleigh Smith
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