Spring Budget 2021 at a glance

Spring Budget 2021 announcements made on 3 March 2021.

Delayed from autumn 2020, Chancellor Rishi Sunak's bounce back Budget is set against a backdrop of jabs and jobs support, and continuing COVID spending as we take four steps to emerge from a third lockdown.

Key takeaways are: extensions to the furlough scheme and the Self-Employed Income Support scheme (SEISS), and further business rate relief. The Stamp Duty holiday is extended.

There will be tax rises on company profits, but coupled with a new 130% Super Deduction for company investment in machinery.  There was no mention of CGT increases, as was widely expected.

New consultations on R&D Tax Credits and the Enterprise Management Incentive have been published.

In exercising pandemic prudence, the Chancellor has attempted a balancing act between continuing support for businesses and culture whilst not choking the recovery with overly aggressive tax increases at this time to recoup the £300bn plus already spent over the last year (£407bn including this Budget).

Tax increases for income tax, National Insurance and VAT were ruled out in the Conservative party manifesto, so the Chancellor has to be more stealth-like in his approach to tax rises - freezing tax thresholds until 2026 (creating fiscal drag).

• Personal allowance frozen at £12,570 from 2021/22 to 2025/26
• Basic & higher rate income tax thresholds frozen at £37,700 and £50,270 respectively from 2021/22 to 2025/26.
• Pensions lifetime allowance frozen at current level of £1,073,100 from 2021/22 to 2025/26.

Sunak issued an amusing pre-Budget video of his 12-month journey as Chancellor, but his work is far from done if he is to ensure that the so-called "levelling up" exercise is achieved and the UK has a vibrant future across the whole country now we have left the European Union.

We have pulled out the key announcements from the Budget.

Further analysis is available in our download and our webinar.

See also the Treasury website and HMRC's Overview document.

Brief recap – key changes previously announced:

• IR35 roll out to private sector postponed until April 2021.
• April 2021 - National Living Wage will rise from £8.72 to £8.91 per hour and is extended to 23 and 24 year olds for the first time.
• R&D payable credits capped from April 2021

Spring Budget 2021 key measures announced:

• UK economy should return to pre-COVID levels by mid 2022
• Furlough scheme extended beyond its current date of 30 April 2021 to 30 September 2021, with workers continuing to receive 80% of their pay, capped at £2,500 per month
• Employers will be asked for a contribution of 10% from July and 20% in August and September towards the hours their staff do not work.
• A fourth self-employment support grant will be available to claim from April - worth 80% of three months' average trading profits, capped at £7,500. Grants will be determined on how much turnover has fallen.
• SEISS is widened (for the 4th and 5th grants) to include those who became self-employed in the tax year 2019-20, provided they filed a tax return by 2 March 2021
• A fifth SEISS grant will be made available from May onwards - claimable from July.
• £20 per week Universal Credit uplift, until September. Plus, a one-off payment of £500 to eligible Working Tax Credit claimants
• From today, a doubling of the apprentice incentive payments given to businesses to £3,000 – that’s for all new hires, of any age
• £300m additional funding for Culture Recovery Fund
• £25,000 to £15m (80% gov guarantee) new Covid Recovery loans
• 100% Business rates holiday continues until 30 June, then for the nine months the rate will be 66%
• 5% reduced rate of VAT extended to 30 September - then an interim 12.5% rate until April 2022
• The new £500,000 nil rate band for Stamp Duty won't end on 31 March, it will end on the 30 June. Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September.
• New government guarantee for mortgage borrowers
• Personal tax thresholds, CGT IHT etc. limits all frozen until 2026 
• From April 2023 - Corporation Tax rate rises to 25% on profits from the current 19%. Small profits rate of 19% continues for profits below £50,000. Taper above £50,000 to £250,000
• New 3-year carry back of losses for corporation tax purposes
• Super Deduction. For the next two years, businesses can claim 130% of their new machinery cost as a tax cut
• All alcohol duties frozen for the second year in a row
• Frozen fuel duty again
• UK infrastructure bank to invest in private and public projects to promote the green economy.
• Help to Grow: Digital will help SMEs to develop digital skills with free expert training and a 50% discount on new productivity-enhancing software
• New consultations on R&D Tax Relief and EMI schemes
• New visa reforms for highly skilled migrants
• New Future Fund Breakthrough to help fill the scale-up funding gap
• New levelling up fund for northern towns
• 8 Freeports (including Plymouth & South Devon) - with simpler planning and easier tariffs.

Commentary from Andrew Browne

"We welcome the number of  measures that have been announced that will help businesses get through the pandemic and help start the recovery.  The super deduction was a surprise and should help boost business investment. 

Most of the tax gap is being achieved by freezing allowances and exemptions with the only real tax increase being corporation tax.  Will this will be enough?  I wouldn’t be surprised to see additional rises in the future."

Other Budget 2021 articles:

• Corporation Tax to rise to 25%
• Corporate tax rates and losses in the 2021 Budget
• New Recovery Loan Scheme launched
• Future Fund: Breakthrough to launch early summer
• The new Super Deduction is simply super
• Why the super deduction is a capital idea
• Self-Employed Income Support fourth grant
• Furlough scheme extended to September 2021
• Restart grants to help the high street

Tax Tables 2021/22

Tax rates and allowances to 5 April 2022 can be downloaded here.

Finance Bill 2021

An updated Finance Bill 2021 will be published on 11 March to reflect the above announcements.

Read the new Finance Bill 2021 and explanatory notes on the Parliamentary website.

In July 2020, 11 legislative measures were published for consultation and a further five were published on 12 November 2020. This Budget will add to those measures.

In addition, on 23 March 2021 the government published a range of tax consultations.

Related items

• HM Treasury Spring Budget 2021
• HM Treasury Spring Budget 2020.

Government measures in place to support businesses and workers during the coronavirus pandemic can be found in our Business after COVID-19: Transition Knowledge Hub.

[Gary Mackley-Smith]