This week, the Chancellor delivered the government’s Budget for 2021. Mr Sunak announced extensions to a number of the current COVID-19 schemes, as well as additional support for individuals and businesses.
Below is a breakdown of some of the key measures for employers. To get the full details on all of Budget 2021 measures announced on Wednesday, please see the GOV.UK website.
Pandemic support measures
Extension of the Coronavirus Job Retention Scheme (CJRS) until the end of September 2021
Furlough for employees has been extended until September. Employees will continue to receive 80% of salary for hours not worked (up to a cap of £2,500 per month) up to the end of June 2021.
For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked (capped at £2,187.50).
In August and September, this will then reduce to 60% of employees’ usual wages (up to a cap of £1,875). Employers will need to continue to pay their furloughed employees at least 80% of their usual wages for the hours they do not work during this time (up to a cap of £2,500 per month). Employers need to pay from their own funds:
- the associated Employer National Insurance contributions;
- and pension contributions on subsidised furlough pay.
Please note, when claiming for periods from 1 May 2021 onwards, eligible employees must have been employed on 2 March 2021 and had a Real Time Information (RTI) submission to HMRC notifying a payment of earnings for that employee by their employer between 20 March 2020 and 2 March 2021.
The VAT deferral new payment scheme
The new payment scheme helps businesses with deferred VAT to pay what they owe in smaller, monthly instalments from March (interest free). The scheme is now open – depending on when you join, you can choose to make 2-11 monthly payments (this needs to be done by the end of june, which can be done through HMRC’s online service).
VAT reduction for the UK’s tourism and hospitality sector
The government will extend the current temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector up to and including 30 September 2021.
From 1 October 2021, the VAT applicable rate to these supplies will then change to 12.5%, which will continue up to and including 31 March 2022, to help businesses manage the transition back to the standard 20% rate.
Income Tax exemption for employer-reimbursed coronavirus antigen tests for tax year 2020-21 and 2021-22
This measure will continue the Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen. There will be no Income Tax liability for the employee or employer.
Extension of the home office equipment expenses COVID-19 easement for the 2021-22 tax year
An Income Tax exemption and corresponding NICs disregard were introduced for the 2020-21 tax year (allowing employers to reimburse employees for the cost of home office equipment deemed necessary to work from home as a result of the pandemic free from Income Tax and Class 1 NICs). This was due to end on 5 April 2021, but will now be extended until 5 April 2022.
Extended loss carry back for business
The trading loss carry-back rule will be temporarily extended from the existing one year to three years for both incorporated and unincorporated businesses.
Tax rate changes
Personal Allowance and higher rate threshold (HRT)
The income tax Personal Allowance will rise with CPI as planned to £12,570 from April 2021(remaining at this level until April 2026). The income tax HRT will rise as planned to £50,270 from April 2021 (remaining at this level until April 2026).
The Personal Allowance applies across the UK, HRT for savings and dividend income will also apply UK-wide. The HRT for non-savings and non-dividend income will apply to taxpayers in England, Wales, and Northern Ireland.
The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. Smaller businesses with profits under £50,000 will remain at the 19% rate and there will be relief for businesses with profits under £250,000 (so that they pay less than the main rate). Please see our previous blog for more information.
Pensions Lifetime Allowance
The government will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.
Annual Tax on Enveloped Dwelling and 15% rate of Stamp Duty Land Tax: Relief for Housing Co-Operatives:
The government will introduce new reliefs from (Annual Tax on Enveloped Dwellings) ATED and the 15% rate of (Stamp Duty Land Tax) SDLT for certain qualifying housing co-operatives.
For SDLT, the relief can be claimed for land transactions where the effective date of the transaction is on or after 3 March 2021. For ATED, the relief will apply to chargeable periods beginning on or after 1 April 2020 (allowing eligible housing co-operatives who have already paid ATED for that period to claim a refund).
Additional HMRC measures
OECD reporting rules for digital platforms: to help taxpayers in the sharing and gig economy get their tax right (alongside helping HMRC detect and tackle non-compliance) the government will consult on the implementation of the OECD rules that will require digital platforms to send information about the income of their sellers to both HMRC and the seller themselves.
The Van Benefit and Car and Van Fuel Benefit: uprating for 2021 by the Consumer Price Index from 6 April 2021.
Interest harmonisation and reform of penalties for late submission and late payment of tax: there will be a reform of the penalty regime for VAT and Income Tax Self Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached.
The new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. The government will introduce a new approach to interest charges and repayment interest to align VAT with other tax regimes. These reforms will come into effect:
- for VAT taxpayers, from periods starting on or after 1 April 2022
- taxpayers in ITSA with business or property income over £10,000 per year, from accounting periods beginning on or after 6 April 2023
- all other taxpayers in ITSA, from accounting periods beginning on or after 6 April 2024.
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