As the path back to normality grows clearer, the Chancellor’s Budget sets out some key tax incentives and changes to mark the way.
On 3 March 2021, the Chancellor delivered the first of two Budgets expected this year. It was essentially a three-part Budget, focusing on continued financial support in the short term, repairing the UK’s public finances in the medium term and encouraging future growth. In this Budget special edition of Tax Matters Digest we discuss the more significant measures announced but please speak to your usual KPMG in the UK contact for a more detailed understanding of how the Budget could affect you or your business.
Extensions were announced to COVID-19 support including the Coronavirus Job Retention Scheme and the stamp duty land tax zero rate band. Businesses, both incorporated and unincorporated, will also be able to benefit from the ability to carry back three years up to £4 million of losses (£2 million for two years). Companies will have 130 percent ‘Super Deduction’ first year capital allowances for a two-year period. A greater-than-expected increase to the corporation tax rate to 25 percent from 1 April 2023 was announced (one of the major sources of additional finance for the Government in the medium term), as well as a return to a form of small profit rate at 19 percent.
No changes were made to the main rates of Income Tax, National Insurance or VAT, as set out in Conservative Manifesto promise. Previously announced increases to bands and thresholds from 6 April 2021 were confirmed including the Personal Allowance and basic rate limit which will be £12,570 and £37,700 respectively (making the higher rate threshold £50,270) and these will then remain frozen until April 2026. However, there was silence on more complicated reforms to the tax system, such as the taxation of capital gains, inheritance and work. Jo Bateson discusses the personal tax aspects of the Budget in more detail on LinkedIn.
On our dedicated Budget 2021 site, we provided our initial insights, as well as our handy On a Page summary to get you up to speed quickly on the key announcements. You can also find videos where our tax specialists discuss the implications of the Budget announcements for multinationals, employers, individuals, and businesses and listen to Melissa Geiger, our UK Head of Tax Policy, who is joined by Vicki Heard and Jo Bateson to share their reactions to the Budget 2021 announcements in a live video recorded on the afternoon of the Budget.
You can find further commentary on some of the key measures announced in the Budget in this edition of Tax Matters Digest as follows:
Corporation tax rate to increase to 25 percent
The Chancellor has confirmed an increase in the main CT rate from 19 to 25 percent with effect from 1 April 2023.
Splash out to help out
The new tax ‘Super Deduction’ and enhanced reliefs in Freeports.
Temporary extension to carry back of trading losses
Trade loss carry back period temporarily extended from one to three years for losses of up to £2 million (adjusted for groups).
Wide-reaching consultation launched on the future of R&D tax incentives
HMRC have announced a wide-reaching consultation on the future of R&D tax incentives as part of the Budget.
Changes ahead for Enterprise Management Incentives?
As part of the Budget’s theme of encouraging enterprise, the Treasury issued a call for evidence on EMI and other tax advantaged share plans.
Coronavirus Job Retention Scheme extended to 30 September 2021
To protect jobs and support businesses beyond the expected end of lockdown, the CJRS will now run for a further five months.
Extension of SDLT ‘holiday’ and other stamp taxes measures
SDLT ‘holiday’ extended, SDLT exemption for Freeports and an effective date for SDLT and ATED reliefs for certain housing cooperatives.
Forthcoming changes to capital taxes – noticeable by their absence
No announcement of immediate changes to or reform of capital taxes but more tax announcements are expected on 23 March 2021.
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