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Chancellor Rishi Sunak has announced key COVID-19 extension support measures, including furlough scheme, hospitality VAT cut and business rates relief.
The Furlough scheme will be extended until the end of September. For employees, there is no change to the terms. The government will continue to pay 80% of salary for hours not worked. For employers, a 10% contribution will be asked from July and a 20% contribution from August and September.
In addition, the self-employment grant has been extended until the end of September. This fourth and fifth round of SEISS grant will take into account 2019-20 tax returns and will also open to those new self-employed who registered in 2019-20 tax return and have filed the Self-Assessment tax return by 2nd March 2021.
HMRC will contact you from mid of April 2021 if they believe you may be eligible for the fourth grant and claims must be made by 31st May 2021, it will be for the period February 2021 to April 2021. The amount of the fifth grant will be determined by how much is your turnover has been reduced. If your turnover has fallen by 30% or more, the full grant of 80% can be claimed. If it is less than 30%, a proportion of 30% of the grant can be claimed. It will cover the period between May 2021 to September 2021 and claims will be open from late July if you re eligible.
Business rates holiday will continue till the end of June and will be discounted by two-thirds for the following 9 months. A lower cap will apply for the businesses that were able to stay open.
The reduced rate of VAT will remain at 5% for the hospitality and tourism sector until 30th September. Thereafter an interim rate of 12.5% will be applied for 6 months and will return at 20% in April 2022.
The chancellor has also announced a new restart grant starting April 2021. All non-essential retail businesses which will open first will receive up to £6k per premises. Hospitality to open later and will receive grants of up to £18k. In addition, an extension to the apprenticeship hiring incentive in England till September 2021. The contactless payment limit will rise to £100 later this year.
A New recovery loan scheme will be used to replace bounce back loan and CIBILS. All businesses can apply from £25k – £10m and the government will provide an 80% guarantee to the banks.
A ‘Super-Deduction’ will be introduced to incentivise businesses to increase investment allowing a reduction of taxable income by 130% of the amount they invest. This relief is only available to companies and not to sole trader or partnerships. The expenditures must be a qualifying Capital Expenditure and incurred in the period between 1st April 2021 to 31st March 2023. Companies may be better off to allocate capital expenditure under AIA to special rate assets instead.
Key tax announcements in the Spring 2021 budget include corporation tax rise from 19% to 25% in April 2023. Businesses with profits under £50k remain at 19%. Anything above £50k will be tapered so you only pay 25% corporation tax when profits exceed £250k.
The carried back rule of trading losses has been extended from 1 year to 3 years now up to a cap of £2 million. This means unincorporated businesses and companies can carry back the trade losses to offset their profits of the last three years.
The threshold for personal income tax-free allowance is to be frozen at £12,570, whilst the higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026. There will be no changes to rates of income tax, national insurance, VAT, including no changes to inheritance tax, lifetime pension allowance or capital gains tax allowances.
Finally, some great news from the chancellor as an extension to stamp duty holiday has also been announced till June. Purchases up to £500,000 will continue to be free from the tax. And thereafter for a further three months until September purchases up the value of £250k will continue to be tax-free, with the usual level of £125k returning from October. Further announcements include the return of a 95% mortgage guarantee scheme, which will be backed by the government. This will be rolled out by banks next month.
In addition to the existing £1,000 payment provided for all new 16-18 years-old apprentices. From April 2021, the financial incentive to employ new apprentices has increased to £3,000 per apprentice.