Budget Comment March 2021
This is part Budget and part reminder of a few other topical areas:
- Budget Comment
- Budget Bullet Points
- Making Tax Digital
- Pensions Again
- Are You Really Self-Employed?
- Reporting UK Property Capital Gains
- Government Gateway
Budget Comment
As Budget build ups go this one was as hysterical as ever, anticipating, in particular, a massive raid on individual wealth with forecasts of increases to Capital Gains Tax (CGT), Inheritance Tax (IHT), restrictions to Lifetime Gifts, Trusts and Pensions. Not to mention Income Tax and VAT (forgetting that Boris had hand-cuffed Rishi in this area!).
And in the end – nothing!
It hasn’t stopped the media announcing ‘BIG TAX RISES IN THE CHANCELLOR’S BUDGET’ (that’s the BBC for you). There are no tax rises – ok the freezing of Allowances will impact those lucky enough to get a pay rise (those on pensions and savings income are unlikely to be affected). But they have been frozen before and this comes after 9 years of generous increases. It makes you wonder what the headlines would have been if there were real TAX RISES.
Either way it’s probably best not to count your chickens – surely big TAX RISES will have to come before long (once the hand-cuffs are off?).
It is always good to plan ahead but why would Rishi announce frozen thresholds for 5 years (well into the next Parliament!). He can’t be sure when social distancing will end – how can he freeze anything in these circumstances?
Budget Bullet Points
- Furlough to be extended to the end of September 2021. Employers to contribute 10% in July and 20% in August & September 2021
- SEISS (Covid Self Employed Grants) extended to end of July 2021 and now include those who submitted a 2019-20 Tax Return with new qualifying self employment. The fourth grant covers February to April 2021 at 80% of average trading profits with a maximum of £7,500. A fifth grant in July covering May to July 2021 but you only get the full grant if your turnover fell by 30% or more – if not you will receive a 30% grant.
- Covid Business support grants
· A new re-start grant of between £6,000 and £18,000 per premise for non-essential retail, leisure, hospitality & gyms.
· Recovery Loan Scheme with a Government guarantee of 80% open to all businesses until the end of the year
· £3,000 for each new apprentice hired between 1 April and 30 September 2021 - £20 per week Universal Credit top up continues until September 2021
- Corporation Tax rises to 25% from 1 April 2023 for profits greater than £250,000; small businesses with profit of £50,000 or less continue to pay the current 19% with a sliding scale in between
- CGT & IHT thresholds, Pensions, Lifetime Allowance, Income Tax Personal Allowance and Basic rate thresholds are all frozen at 2020-21 levels until 2025-26 (not big news on IHT which will have been frozen for 16 years by then!)
- VAT and National Insurance – no change (as per manifesto)
- Stamp Duty holiday on first £500,000 extends to June and then on £250,000 until 30 September 2021
- Business Rates holiday extended
- 130% business investment ‘super-deduction’ for expenditure in the two years ending 31 March 2023
- Green Savings Bond to be issued by NS&I in the summer
- From 1 April 2022 significant changes to late payment and late submission penalties (these won’t affect you if you do everything on time!)
Making Tax Digital ‘MTD’
As previously noted there’s a revolution on its way (slowly!). First announced in the April 2015 Budget, ‘MTD’ will affect us all. The timing has been significantly delayed. So far it has happened for VAT registered businesses above the VAT threshold (£85,000) and we expect the next wave of MTD to affect VAT registered businesses with a turnover below £85,000 for the first returns starting on or after April 2022.
At present, Self Employed and Landlords with income above £10,000 will be required to follow MTD rules from the accounting period starting on or after 6 April 2023. Further details to follow…
Are you really Self Employed?
The rules are tightening! If you (or the person/business engaging you) want your status to be ‘self-employed’ (either on your own account or through your own limited company), it is important for you to be seen to be running a business rather acting as an employee. Otherwise you and (more particularly) your engager could have an issue with the UK tax authorities (they may insist that you are paid through an official payroll). There are no hard and fast rules here but having a ‘self-employed’ status generally means for example, seeking additional customers, not directly supervising client staff, working with your own equipment, having a Website describing your business and of course you should be the one advising people what to do rather than being told what to do!
Pensions
Recapping, this is an increasingly complex area for which we recommend specialist advice but there are still a few things to look out for:
- Personal Pension Annual Allowance continues to be £40,000 (with potential to bring forward unused allowance from the previous three years) providing you have earned income of at least this level
- Once your adjusted income is over £240,000 your Personal Pension Annual Allowance will be lost at the rate of £1 for every £2 that your total income exceeds £240,000. It carries on tapering until your total income exceeds £312,000 at which point you are fully tapered down to £4,000 (previously the full taper only took you down to £10,000)
- The Lifetime Allowance remains at £1,073,100
Reporting UK Property Capital Gains
For all UK residential property sales since 5 April 2020, where tax is due, you must submit a Capital Gains Tax Return within 30 days of the completion – the estimated Capital Gains Tax (CGT) is due at the same time. Penalties and interest will be charged on late submissions. We say ‘estimated’ because CGT rates depend on your level of income and you may subsequently realise a loss that can be offset.
It is clear that many Solicitors don’t consider it to be their responsibility to point out this obligation(!) so please inform us immediately on sale if you are unsure whether your Solicitor is dealing with the Return…
The sale will also still form part of your Self Assessment Tax Return for the year in question.
Government Gateway
You may have heard the expression ‘Government Gateway’. It is becoming more and more a feature of everyday life!
If you haven’t registered then we recommend that you do so – it’s good to be prepared!
Follow the link here: www.gov.uk/personal-tax-account/sign-in/prove-identity
Just to be clear, we deal with your Self Assessment (and where applicable) Company Corporation Tax through our own Agent Government Gateway but we cannot set up your individual Gateway. There are a number of areas for which it is required. For example:
- Reporting UK residential property sales (see above!)
- Applying for time to pay your tax liability
- Accessing your Personal Tax Account
- Submitting Making Tax Digital VAT Returns
- Submitting Making Tax Digital Rental Income Returns (to follow)
- Applying for your State Pension forecast
The comments above are brief highlights and each item is subject to change, please note the full chart of Rates and Allowances below and remember – there is always more to it than meets the eye so please contact us before taking or refraining from action.
Rates and Allowances for 2021 and 2022
Rates and allowances for Income Tax, Corporation Tax, Capital Gains Tax, and Inheritance Tax are set out below.
2020-21 (£) | 2021-22 (£) | Increase (£) | |
Income Tax allowances | |||
Personal allowance Personal allowance (age 65-74) Personal allowance (age 75 and over) |
12,500 N/A N/A |
12,570 N/A N/A |
70 0 0 |
Income limit for under 65 personal allowance Income limit for age-related allowances |
100,000 N/A |
100,000 N/A |
0 0 |
Married couple’s allowance for people born before 6 April 1935 Minimum amount of married couple’s allowance Blind person’s allowance |
9,075 3,510 2,500 |
9,125 3,530 2,520 |
50 20 20 |
Capital Gains Tax annual exempt amount: Individuals etc. Trustees Main Rate Lower Rate Main Rate (for gains on residential property) Lower Rate (for gains on residential property) |
12,300 6,150 20% 10% 28% 18% |
12,300 6,150 20% 10% 28% 18% |
|
Inheritance Tax Nil rate band limit Residence nil rate band limit Main Rate |
325,000 100,000 40% |
325,000 100,000 40% |
|
Taxable bands 2020-21 (£) |
Taxable bands 2021-22 (£) |
||
Starting rate 10% |
– |
Starting rate 10% |
– |
Basic rate 20% |
0 – 37,500 |
Basic rate 20% |
0 – 37,500 |
Higher rate 40% |
37,501 – 150,000 |
Higher rate 40% |
37,501 – 150,000 |
Additional rate 45% |
Over 150,000 |
Additional rate 45% |
Over £150,000 |
Income tax rates |
|
|
|
Tax year 2020-21 |
Tax year 2021-22 |
Basic rate |
20% |
20% |
Higher rate |
40% |
40% |
Additional rate |
45% |
45% |
Dividend ordinary rate – for dividends otherwise taxable at the basic rate |
7.5% |
7.5% |
Dividend upper rate – for dividends otherwise taxable at the higher rate |
32.5% |
32.5% |
Dividend additional rate – for dividends otherwise taxable at the additional rate |
38.1% |
38.1% |
Dividend allowance |
£2,000 |
£2,000 |
Personal savings allowance Higher rate taxpayers will not have tax to pay on their first £500 of savings income. |
£1,000
£500 |
£1,000
£500 |
Starting rate for savings |
|
|
|
Tax year 2020-21 |
Tax year 2021-22 |
Starting rate for savings |
0% |
0% |
Starting rate limit for savings |
£5,000 |
£5,000 |
Corporation Tax profits 2020-21 (£) |
|
All profits – main rate 19% |
N/A |
Marginal relief |
N/A |
National Insurance
|
2020/2021 |
2021/2021 |
||||
Class 1 Employees (Primary) |
||||||
On first |
£183 pw |
Nil |
£184 pw |
Nil |
||
Between |
£183 – £962 pw |
12% |
£184 – £967 pw |
12% |
||
Over |
£962 pw |
2% |
£967 pw |
2% |
||
Class 1 Employers (secondary) |
||||||
On first |
£169 pw |
Nil |
£170 pw |
Nil |
||
Over |
£169 pw |
13.8% |
£170 pw |
13.8% |
||
Employers’ contracted-out rebate, salary related schemes |
N/A |
|
N/A |
|||
Employers’ contracted-out rebate, money purchase schemes |
Abolished |
|
Abolished |
|||
Class 2 Self employed |
||||||
Flat rate |
£3.05 pw |
|
£3.05 pw |
|||
Small earnings exception |
£6,475 pa |
|
£6,515 pa |
|||
Special Class 2 rate for share fisherman |
£3.70 pw |
|
£3.70 pw |
|||
Special Class 2 rate for volunteer development workers |
£6.00 pw |
|
£6.00 pw |
|||
Class 3 Voluntary |
||||||
Flat rate |
|
£15.30 pw |
|
£15.40 pw |
||
Class 4 Self employed |
||||||
On profits between |
£9,500-£50,000 pa |
9% |
£9,568 – £50,270 pa |
9% |
||
|
above £50,000 |
2% |
above £50,270 |
2% |
Rate |
All land in the UK |
Rate |
All land in the UK |
|
Residential |
|
Additional residential property |
Zero |
£0-125,000 |
3% |
£0-125,000 |
2% |
On next £125,00 |
5% |
On next £125,00 |
5% |
On next £675,000 |
8% |
On next £675,000 |
10% |
On next £575,000 |
13% |
On next £575,000 |
12% |
On the rest (above) £1,500,000 |
15% |
On the rest (above) £1,500,000 |
Previously, SDLT was charged at a single rate for the entire price of a property. From 17 March 2017, SDLT is charged at increasing rates for each portion of the price.
Rate |
All land in the UK |
|
Non-residential |
Zero |
£0-150,000 |
2% |
£150,001 – 250,000 |
5% |
£250,001 |
The rate of stamp duty / stamp duty reserve tax on the transfer of shares and securities is unchanged at 0.5% for 2020-21.
Value Added Tax (VAT) – Registration and Deregistration thresholds | ||
April 2020-21 | April 2021-22 | |
Standard rate | 20% | 20% |
Redduced rate | 5% | 5% |
Zero rate | 0% | 0% |
Exempt | n/a | n/a |
Value Added Tax (VAT) – Registration and Deregistration thresholds |
||
|
From April 2019 |
From April 2020 |
VAT – registration threshold |
85,000 |
85,000 |
VAT – deregistration threshold |
83,000 |
83,000 |