Budget Report

The Chancellor presented his 2021-22 budget today. We provide a round up of the important aspects for business owners.

With additional measures also announced for Covid support this was a packed report and we have split off Covid related announcements to a separate blog - Coronavirus Support Update 3rd Mar.

corporation Tax

Corporation Tax will remain at 19% in 2020-21 but it was announced that for businesses with profits above £50k a new rate of 25% would be introduced from April 2023.

In fact the new tax rate will be tapered from 19% to 25% on profits between £50k and £250k.

Loss Relief has been extended. Companies making a loss will now be able to carry back losses up to three years for the financial years 2020-21 and 2021-22. This is up from 12 months previously.

capital allowances

An attractive ‘super-deduction’ of 130% of capital expenditure on qualifying plant and machinery will apply from 1st April 2021.

Designed to encourage investment in machinery, the Capital Allowances will a 130% deduction on profits on expenditure on plant and machinery.

It means that the effective tax deduction for capital expenditure rises from 19p of every £1 spent to 25p.

Personal tax

Whilst the Personal Tax Allowance and Basic Rate Income tax increase marginally in 2021-22 the big news from the budget was that thereafter they would remain frozen until March 2026.

• Personal Allowance increases to £12,570

• Basic Rate Tax Band increases to £37,700

The net effect is that Higher Rate tax will kick in from April at £50,270.

Main other tax rates remain unchanged:

• Capital Gains Tax

• Tax on Interest

• Dividends Tax

P11d Benefit In kind

The following benefits will no longer be subject to P11d Benefit in Kind Tax:

• Employees provided with bicycles that are not mainly used for work. Previously there was a limit to the exclusion for bike schemes that the bikes be mainly used for getting to work. With Covid this has been removed for anyone joining a scheme until Apr 2022.

• Employees who benefit from personal use of electric vans provided by their employer.