UK: Tax proposals in 2021 budget

UK: Tax proposals in 2021 budget

Tax measures proposed on 3 March 2021 in the 2021 budget include items that may affect business and individual taxpayers.

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The following provides a summary of certain tax proposals.

Businesses

  • Corporation tax is to remain at 19% until 31 March 2023 then it would increase to 25% from 1 April 2023 accompanied with a small profits rate of 19% for profits up to £50,000 and increasing to 25% for profits of £250,000 or more.
  • Reduced 5% VAT rate for hospitality, holiday accommodation and attractions extended until 30 September 2021 and then increased to 12.5% until 31 March 2022.
  • Temporary 130% and 50% first-year allowances for new investments in plant and machinery and special rate assets made between 1 April 2021 and 31 March 2023.
  • Temporary extension to trade loss carryback period to three years for losses arising in 2020-2021 and 2021-2022 based on a £2 million allowance per year (adjusted for groups).
  • Consultations launched on improving the competitiveness of the UK’s research and development (R&D) tax credit schemes.
  • Banking surcharge consultation announced.
  • Eight freeports announced across England with further sites likely in Scotland, Northern Ireland, and Wales.
  • Withholding tax exemption for cross-border payments of interest and royalties to associated companies in the EU to be repealed from 1 June 2021.
  • Business rates holiday for retail, hospitality, and leisure extended until 30 June 2021 and then up to 2/3 discount until 31 March 2022.

Employers

  • Coronavirus Job Retention Scheme would be extended to 30 September 2021 in its current form, with employers contributing 10% of reference pay from July and 20% of reference pay from August.
  • Temporary income tax and National Insurance Contribution (NIC) easements for certain COVID-19-related benefits in-kind and employer reimbursed expenses extended to 2021-2022.
  • Consultation on how Enterprise Management Incentive tax advantaged share plans could provide more effective support to growth companies competing for key talent.
  • Off-payroll working changes from 6 April 2021 confirmed, with a change to better target the definition of a worker’s “intermediary” to prevent abuse, and other minor changes.
  • The government would spend £100 million to set up a new Taxpayer Protection Taskforce of 1,265 HM Revenue & Customs staff who will focus on investigating fraudulent claims under the Coronavirus Job Retention Scheme and Self Employed Income Support Scheme.

Individuals

  • No adjustment to income tax or NIC rates.
  • No major changes with respect to inheritance tax or capital gains tax announced, but consultations still to be published on 23 March so change could be coming.
  • Personal allowance increased to £12,570 from 6 April 2021 then frozen until 5 April 2026. Higher rate threshold increased to £50,270 from 6 April 2021 then frozen until 5 April 2026.
  • Inheritance tax “nil” rate band, pensions lifetime allowance, capital gains tax annual exempt amount frozen until 5 April 2026.
  • Stamp duty land tax nil rate band £500,000 to 30 June 2021, then £250,000 to 30 September 2021 and £125,000 thereafter. 

Read an overview of the tax measures in the 2021 budget prepared by the KPMG member firm in the UK

Read a one-page summary [PDF 240 KB] of the tax proposals in the 2021 budget prepared by the KPMG member firm in the UK

 

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