2021 Budget - 3rd March

Mar 04 2021

2021 Budget – 3rd March

Chancellor Rishi Sunak delivered the UK 2021 Budget in Parliament setting out tax and spending plans with measures to support businesses and jobs/

livelihoods through the current pandemic – within 3 core topics:

  • supporting the British people and businesses through this moment of crisis;
  • once on the way to recovery, beginning to fix the public finances;
  • and starting the work of building the future UK economy

Measures that directly affect UK payroll professionals and employees

Extension of Furlough scheme

  • The Coronavirus Job Retention Scheme (CJRS) has been extended until 30 September 2021, with flexibly furloughed employees still expected to receive 80% of their ‘usual’ earnings for unworked hours (up to the £2,500/month cap) .
  • However, from July employers will be expected to share the burden – so in July the CJRS grant will only cover 70% of ‘usual’ wages for any unworked hours, and only 60% in August and September (subject to a pro-rated cap in each month).
  • As currently, employers must also continue to pay the associated Employer NICs and pension contributions on subsidised furlough pay from their own funds.
  • For periods starting on or after 1 May 2021, employers can claim for an employee who was employed on 2 March 2021 (so long as they were included in a PAYE RTI submission made to HMRC between 20 March 2020 and 2 March 2021) – even if no claim has previously been made for that employee before 2 March 2021.

Personal Allowances

  • The annual personal allowance will increase (as previously announced) to £12,570 from 6th April for the 2021/22 tax year; however, it will then be frozen (i.e. will not be increased annually) until 2026.

Higher Rate Threshold

  • Similarly, the higher rate threshold for income tax will increase (as planned) to £50,270 from 6th April 2021; however, it too will then be frozen until 2026.  .

 National Insurance Contributions Threshold

  • And also similarly, the Upper Earnings Limit (UEL) will increase (as planned) to £50,270 from 6th April 2021; thereby retaining its alignment with the income tax higher rate threshold, which will remain aligned until 2026.

 Pensions Lifetime Allowance

  • The pensions lifetime allowance will be maintained at the current level of £1,073,100 until 5th April 2026.

Exemption for COVID-19 tests

  • The income tax exemption and NICs disregard for COVID-19 antigen tests (when provided by, or reimbursed by employers) will be extended to the 2021/22 tax year.

Exemption for home office expenses

  • The income tax exemption and NICs disregard for employer reimbursed expenses (intended to cover the cost of working from home) will be extended to the 2021/22 tax year.

Employment and immigration

  • Reforms (details tba) to the immigration system, based on a new visa scheme, to help ambitious UK businesses attract the brightest and best international talent.

 Employing a new apprentice / trainee

  • In addition to the existing payments of £1,000 for apprentices (if aged 16-18 or under 25 with an Education, Health and Care Plan), employers in England who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire.
  • An additional £126 million will be made available for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in the 2021/22 academic year.  Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Cycle to Work scheme

  • Where an employee was provided with a cycle or cyclist’s safety equipment before 21 December 2020, the guidance will be updated so that the usual requirement (that cycle or cyclist’s safety equipment is used mainly for commuting etc) will automatically be treated as met for the period commencing with 16 March 2020 and ending with 5 April 2022.

Statutory Sick Pay Rebate scheme

  • SME employers will continue to be able to claim up to two weeks of SSP for eligible employees who are absent for COVID-19 related illness, isolation or shielding. .

Measures not directly affecting UK payroll – but of possible relevance to employers

Universal Credit + Working Tax Credit

  • Universal Credit uplift of £20 per week extended for further 6 months in GB, with the Northern Ireland Executive receiving additional funding to match that increase; and a one-off payment of £500 to eligible Working Tax Credit claimants across the UK.

Restart Grants

  • A one-off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England that were forced to close; plus up to £6,000 for other non-essential premises due to re-open in April.  The government is also providing all local authorities in England with an additional £425 million of discretionary business grant funding on top of that already allocated.

Help to Grow scheme

  • Two new schemes (details tba): to upskill up to 30,000 SME businesses via a new management programme; and to provide free online advice, plus a discount to adopt productivity-enhancing software, that will help up to 100,000 SMEs save time and money.

Business Rates relief

  • 750,000 eligible businesses in retail, hospitality and leisure sectors in England will benefit from 100% business rates relief from 1 April to 30 June 2021; with a 66% discount after that until 31 March 2022.

Reduced VAT rates

  • Extension to the current VAT cut (to 5%) for hospitality, accommodation and attractions across the UK until the end of September; followed by a reduced 12.5% rate for a further 6 months until 31 March 2022.

Changes in business tax

  • The general Corporation Tax rate will increase to 25%, but this will not take effect until 2023.  Businesses with profits of £50,000 or less (around 70% of actively trading companies) will continue to be taxed at 19%, and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
  • Beginning in April 2021, a new ‘super-deduction’ first year capital allowance will cut companies’ tax bill by 25p for every pound they invest in new equipment (on top of the expenditure being tax deductible in the first place) – which should be worth around £25 billion to UK companies over the two-year period that this will be in full effect.

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