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.


The following provides a summary of certain tax proposals.


  • 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• Withholding tax exemption for cross-border payments of interest and royalties to associated companies in the EU to be repealed from 1 June 2021.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.


  • 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.


  • 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


© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organization please visit

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us