Chancellor Rishi Sunak has now delivered his latest and widely anticipated Budget speech.
As expected there are significant changes to Corporation Tax, and a future freeze on personal allowances and tax bands, and additional support under COVID.
We summarise the major points of his speech below. What is certain that planning is now essential for small businesses.
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Income Tax
Personal tax allowances will increase from next year to £12,570 and the the higher rate tax threshold will increase to £50,270 before it will be frozen until April 2026.
Capital Gains Tax
There is no increase to the CGT Annual Exemption, so this will remain at £12,300, meaning that only Capital Gains over this amount each year will be taxed.
Corporation Tax
Currently, the rate of Corporation Tax that all Companies pay on their taxable profits is at a rate of 19%.
From April 2023 the rate of Corporation Tax will increase to 25%. However, companies with profits of less than £50,000 will continue to pay tax at 19%, to be called the ‘small profit rate’.
Companies with profits of up to £250,000 will have tapered and hybrid Corporation Tax rates from 19% to 25%.
Only Companies with profits over £250,000 will pay the new 25% tax rate, which is just 10% of all UK businesses.
The Government have announced a new incentive for businesses who invest in new equipment etc (capital allowances). Currently most companies can claim 100% of the purchase of this equipment but under the new scheme called ‘Super Deduction’, this will allow all business to claim 130% of the cost of purchase.
Inheritance Tax
The Inheritance Tax threshold remains the same and unchanged at £325,000. Tax is charged at 40% over this amount.
VAT
The 5% VAT rate for the hospitality sector is to be extended until 30th September 2021. From 1st October 2021 until 31st March 2022 there will be an interim rate of 12.5% in this industry sector. From 1st April 2022 the rate will revert to the standard rate 20%.
The VAT registration threshold of £85,000 will remain at that level for the next two years.
Other Topical Items
As expected, the Furlough Scheme for companies supporting their employees in these difficult time, the support and claims to carry on until September.
Similarly, the Self Employment Income Support Scheme has been extended until September with a 4th claim shortly covering February, March and April, and then a 5th and final claim later in the year in July. For those who were newly self employed in 2019/20 and missed out on the first three Support Claims, provided that the individual filed a Tax Return for 2019/20 by the end of February, then they will be entitled to claim under the 4th and 5th claims.
Good news for retail as further grants of up to £6,000 per premises available. For Gyms and other similar industries opening later in the year compared to other non essential retail, grants of up to £18,000 per premises are available.
The Stamp Duty holiday that was due to end on 31st March 2021 has been extended by 3 months and will now end on 30th June 2021.
New 95% mortgages to become readily available with many high street lenders already signed up to the scheme. Available to all, not just first time buyers but borrowing will be capped to £600,000.
All duties on Alcohol have been frozen.
The proposed fuel duty increase has been cancelled.
If you want to discuss any of the above topics in greater detail then please do not hesitate to get in contact with us below. We have Charted Accountants in London, Essex and Manchester ready to take your call.
