UK Budget 2021 – Jobs, livelihoods, and business support
Corporate tax
- The corporation tax rate will increase to 25% from April 2023 on profits over £250,000. The rate for small profits under £50,000 will remain at 19%. A taper will apply for profits falling between £50,000 and £250,000.
- As part of this change the current 51% group company test will be repealed and replaced with associated company rules. These will be used for determining whether a company is large or very large for quarterly instalment payment purposes. This is likely to result in more companies falling within the quarterly instalment payment rules.
- The amount of SME payable R&D credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability. This applies for accounting periods beginning on or after 1 April 2021.
Personal tax
- The Personal Allowance will rise with CPI as planned to £12,570 from April 2021 and will remain at this level until April 2026.
- The higher rate income tax threshold will rise as planned to £50,270 from April 2021 and will remain at this level until April 2026.
- Similarly, the National Insurance contribution thresholds will also rise with CPI from April 2021. The NICs Primary Threshold will then be £9,568 per year and the Upper Earnings Threshold Limit will increase to £50,270. They will then remain frozen until April 2026.
- All car and van benefit charges will increase by the CPI from April 2021.
Capital taxes
- The inheritance tax nil-rate band and residence nil-rate band will remain at existing levels until April 2026. The nil-rate band is £325,000, the residence nil-rate band at £175,000 and the residence nil-rate band taper will continue to start at £2m.
- The Capital Gains Tax annual exemption remains at £12,300 for individuals, personal representatives and some types of trusts and £6,150 for most trusts. This is also frozen until April 2026.
Pensions and savings tax
- The lifetime allowance is maintained at its current level of £1,073,100 until April 2026.
- ISA limits for 2021-22 remain unchanged at £20,000 and for Junior ISAs at £9,000.
Other
- The VAT threshold remains unchanged for a further two years from 1 April 2022.
- A new points-based system will be introduced for penalties relating to late submission and late payment of tax.
- The government has launched a review of R&D tax reliefs, with a consultation published alongside the Budget.
- A call for evidence has been published on how more companies can access Enterprise Management Incentives.
- A new VISA scheme will be introduced to help start-ups and rapidly growing tech firms source talent from overseas.
- The Liverpool City Region has been successful in bidding for Freeport status, which will allow businesses located within the freeport access to more generous tax relief, customs benefits, and wider government support.
We are still working through the detail relating to most of the announcements so you will appreciate the above is not tax advice. We will publish more information on the important measures as it becomes available. Please contact us with any specific queries.