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News Item - March 2021


A brief summary of the Chancellor's Spring Statement on Wednesday 3rd March 2021:


  • An increase in the rate of Corporation Tax to 25%, for businesses making annual profits over £250,000, from April 2023. However, businesses with profits under £500,000 will continue to be taxed at 19%, but with a taper for those in between. The Diverted Profits Tax rate will rise to 31%, also from April 2023.

  • There will be a new capital allowance "super deduction" from April 2021, lasting for the next two years, which cuts companies' tax bills by 125p for every £1 invested in new qualifying plant and machinery. In effect reducing their taxable profits by 130% of the cost.

  • Businesses will also be allowed to carry back losses of up to £2m for three years, instead of one. This equates to an additional tax refund of up to £760,000.

  • For SME's, the amount of payable R & D tax credit a business can receive in any one year, will be capped at £20,000 plus three times the company's total PAYE and NI liability.

  • Business rates - eligible retail, hospitality and leisure properties in England will continue to qualify for 100% business rates relief until 30th June 2021. This will be followed by 66% from 1st July 2021 to 31st March 2022, though capped at £2m per business for properties that were forced to close on 5th January 2021. It is reduced to £105,000 per business for other eligible properties. Certain businesses will be able to treat business rates relief repayments as deductible, for both corporation and income tax purposes. 

  • VAT - No rate rises were announced. The 5% reduced rate for the hospitality and tourism industries will continue until 30th September 2021, to be replaced by a reduced rate of 12.5% until April 2022. The VAT registration threshold will remain at £85,000 for two years from April 2022. 

  • Alignment of VAT late payments with other tax regimes, for periods starting on or after 1st April 2022. The VAT penalties will be points based, with a new approach to interest charges and repayment interest.

  • Personal tax - No increases in rates for either income tax or NI. However, by "stealth", the Personal tax allowance thresholds for both the basic and higher rate will be frozen at £12,570 and £50,270 respectively until April 2026. Also frozen until April 2026; Inheritance tax thresholds, Pensions Lifetime Allowance and annual exempt amount in Capital Gains tax.

  • Self-Assessment - Late returns will also be subjected to a new points based system, with a new regime introducing penalties proportionate to the amount of tax owed and how late the tax due. Applies to taxpayers with business or property income over £100,000 per year, from accounting periods beginning on or after 6th April 2023. 

  • Stamp Duty - The SDLT holiday was extended from 31st March to 30 June 2021. The nil rate band will drop from £500,000 to £250,000 until 30th September 2021.

  • Miscellaneous - Fuel and alcohol duties were frozen for a year. Eight new freeports were announced (these will be special economic areas with more generous tax regimes). Both the Furlough and Self-Employed Income Support Schemes were extended, with the latter now able to access the upcoming fourth and fifth SEISS grants - though the Chancellor added "providing they filed a tax return by midnight last night" ! Other specially tailored funding and loan schemes will also be made available for businesses.

Please note that the above report is only our brief interpretation and understanding of the Government's budget proposals for the 2021 Spring Statement, delivered to Parliament by Rishi Sunak on Wednesday 3rd March 2021. These provisions are normally confirmed upon the receipt of Royal Assent later in the year. Jonathan Davis and his associates can not be held responsible for any errors, omissions or changes to the above.

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