On Wednesday Chancellor Rishi Sunak announced the governments latest tax and spending plans in the annual budget. Here is how you could be impacted as a limited company director;
Corporation Tax Changes
One of the most significant impacts upon limited companies are the changes to corporation tax rates. From April 2023 the headline rate of corporation tax will increase to 25% from its current 19%.
However, for limited companies with profits below £50,000 per annum the corporation tax rate will remain at 19%. The rate will then be tapered up, depending on business profits - only businesses with profits of more than £250,000 will pay the full 25%.
Capital Allowances "Super Deductions"
Between 1st April 2021 and 31 March 2023 capital allowances on new plant and machinery will increase to 130% for items that would usually qualify for the 18% writing down allowance. A first year allowance of 50% will be available for items that would usually qualify for the 6% allowance.
This measure mitigates some of the corporation tax increase and is intended to encourage investment by companies to increase productivity.
Extension of the Coronavirus Job Support Scheme
The CJSS commonly known as "furlough" has been extended to 30th September 2021. Directors and employees with payroll submitted prior to 2nd March 2021 will be eligible for furlough from 1st May 2021 (with those on payroll prior to October 2020 continuing to be eligible through March and April). Support grants remain at 80% of an employees gross wages for March to June.
From 1st July support will reduce to 70% of an employees gross wages, then to 60% in August and September.
Personal Allowance Freeze
For directors completing self assessment returns the personal allowance of £12,500 will increase to £12,570 in April 2022 before being frozen until 2026.
In addition, the higher 40% tax band will increase by £270 to £50,270 in April 2022 and will then be frozen until 2026. The outcome of this is that as wages rise more taxpayers will fall into the 20% and 40% income tax bands.
- £5 billion for new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
- A new UK-wide Recovery Loan Scheme to make available loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million.
- Extension to the VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022.
- 750,000 eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates relief.
- Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
- £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
- Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee.
- Increase in the legal limit for single contactless payments, from £45 to £100.
- Fuel duty and alcohol duties will be frozen.
More information on the 2021 budget can be found here - www.gov.uk/budget-2021-documents
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