Budget 2021 – summary of relevant key points
The Chancellor Rishi Sunak presented his second Budget on Wednesday 3 March 2021. In his speech he stated his Budget ‘meets the moment with a three-part plan to protect the jobs and livelihoods of the British people’.
Main Budget proposals relevant to dental practices are listed below with more detailed points further in the text:
- Freeze on personal tax allowances
- Extension of the furlough scheme
- Increased payments for employers who hire new apprentices
- National Living Wage and National Minimum Wage
- Corporation Tax Rates
- Super deductions
- Capital Gains Tax
The personal allowance
The personal allowance is currently £12,500. Budget 2018 announced that the allowance would remain at the same level until 2020/21 and the statutory provision to increase the allowance annually by CPI was to be overridden. The Chancellor has confirmed that the personal allowance will increase by CPI (0.5%) for 2021/22 to £12,570. There is a reduction in the personal allowance for those with ‘adjusted net income’ over £100,000. The reduction is £1 for every £2 of income above £100,000. So for the current tax year, there is no personal allowance where adjusted net income exceeds £125,000. For 2021/22 there will be no personal allowance where adjusted net income exceeds £125,140. The Chancellor announced that the personal allowance will be frozen at £12,570 for the tax years 2022/23 to 2025/26.
Further extension of JRS (furlough scheme)
In Budget 2021 the Chancellor has further extended the scheme to 30 September 2021. The level of grant available to employers under the scheme will stay the same until 30 June 2021. From 1 July 2021, the level of grant will be reduced and employers will be asked to contribute towards the cost of furloughed employees’ wages. To be eligible for the grant an employer must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough. The reduction in the level of the grant means that the percentage recovery of furloughed wages will be as follows:
- for July 2021 - 70% of furloughed wages up to a maximum of £2,187.50 and
- for August and September 2021 - 60% of furloughed wages up to a maximum of £1,875.00. Employers will need to continue to fund employer NICs and mandatory minimum automatic enrolment pension contributions.
Payments for employers who hire new apprentices
The government will extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme. This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.
National Living Wage (NLW) and National Minimum Wage (NMW)
The National Living Wage will increase by 2.2% and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, the government has announced smaller increases in NMW in recognition of the risks to youth employment which the current economic situation poses.
From 1 April 2021, the new hourly rates of NLW and NMW are:
- £8.91 for those 23 years old and over
- £8.36 for 21-22 year olds
- £6.56 for 18-20 year olds
- £4.62 for under 18s
- £4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.
Corporation tax rates
The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances. Under this measure a company will be allowed to claim:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances. This relief is not available for unincorporated businesses.
Capital gains tax (CGT) rates No changes to the current rates of CGT have been announced at Budget 2021. This means that the rate remains at 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief. There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:
- Business Asset Disposal Relief (BADR) (formerly known as Entrepreneurs’ Relief). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
- Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares. The lifetime limit for BADR was reduced from £10 million to £1 million for BADR qualifying disposals made on or after 11 March 2020. Investors’ Relief continues to have a lifetime limit of £10 million.
The summary provides only an overview of the main proposals announced by the Chancellor of the Exchequer in his Budget Statement, and no action should be taken without consulting a qualified advisor and researching the detailed legislation which can be found: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966161/Budget_2021_Web_accessible.pdf No responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.
For further information on the budget and how it may impact you with regards to practice valuation, growth planning, exit or retirement planning reach out to our team on 01332 609318 or by completing the enquiry form.