Budget Summary 2021
The Chancellor clearly had the UK’s recovery from the COVID-19 pandemic at the fore of his thoughts, painting an optimistic picture in terms of economic recovery but stressing caution in the short term.
With no rises to the Personal Allowance for the next 5 years and Corporation Tax rising for the most profitable businesses from April 2023, these will only be the start in terms of the road to recovery – we were warned to expect more tax rises in the coming years.
It was also a very cautious Budget in many senses with plenty of targeted support still for individuals and businesses to make sure jobs continue to be protected as we come out the other side of an incredibly challenging 12 months. A relatively quiet Budget in terms of changes impacting the temporary labour sector specifically but not forgetting that the most significant change in some years to our sector with the Off-Payroll working rules from 6th April 2021.
For now, though, we need to brush ourselves down and continue to prepare for the coming weeks and months in supporting our customers and clients with the Off-Payroll working changes.
If you have any questions about how the 2021 budget may impact you or your business, please do not hesitate to contact us.
Off-payroll working in the private sector
Despite there being no mention of the Off-Payroll working rules in the private sector during the Chancellor’s speech or in the “Red Book”, the primary legislation had already reached Royal Assent in July last year, so this was his final chance to repeal the law. The 2021 Finance Bill does contain a few technical amendments.
The Government silently released a couple of policy papers and updated their Employment Status Manuals and HM Treasury has continued to make it expressively clear that these reforms will indeed take effect from 6th April 2021. End-User Clients should continue to make Status Determinations on their contingent workforce as soon as possible to stop the uncertainty of supply and provide everyone in the supply chain with more clarity with less than 5 weeks to go until the changes take effect.
Income Tax Thresholds
The Income Tax (PAYE) thresholds for England and Wales will increase for the 2021/22 tax year with effect from 6th April 2021
- The Personal Allowance (amount people can earn before paying any Tax) will increase to £12,570
- The point in which Higher Rate Tax becomes payable will increase to £37,700
- The Additional rate of Tax (earnings over £150,000) remains unchanged
- The Personal Allowance and Higher Rate Tax rates will be frozen until April 2026
- Scottish tax thresholds have also increased
- Percentages for each threshold remain unchanged
- Dividend Tax rates and the £2,000 Dividend Allowance remain unchanged
National Insurance Thresholds
The National Insurance Thresholds will increase for the 2021/22 tax year with effect from 6th April 2021:
- The point at which Employer contributions become due is rising by £1 per week to £170 (Secondary Threshold)
- The point in which Employee contributions become due is rising by £1 per week to £184 (Primary Threshold)
- The Upper Earning Limit will increase to £967 per week and will now be frozen until April 2026 in line with the Higher Rate Tax rate
- Percentages for each threshold remain unchanged
- Class 2 NICs will remain at £3.05 per week
Student Loan Thresholds
- Plan 1 – rising to £19,895 (from £19,390). Earnings over the threshold will be subject to a 9% deduction rate
- Plan 2 – rising to £27,295 (from £26,575). Earnings over the threshold will be subject to a 9% deduction rate
- Plan 4 – Introduced from 6th April 2021 for Scottish students. The initial threshold is £25,000 and earnings over the threshold will be subject to a 9% deduction rate
- The Postgraduate Loan (PGL) threshold will remain at £21,000. Earnings over the threshold are subject to a 6% deduction rate
We will also see small increases in Statutory Payments such as Sick Pay (£0.50/week), Maternity/Paternity (£0.77/week)
National Living Wage (NLW)
As previously announced, the NLW will increase to £8.91 (from £8.72) per hour from 1st April 2021.
The significant change this year is that the NLW applies to any employee over 23 years old, which has reduced from 25.
National Minimum Wage (NMW)
The NMW rates will also increase as follows for each of the age brackets form 1st April 2021:
- 21 to 22-year-olds – from £8.20 to £8.36 per hour
- 18 to 20-year-olds – from £6.45 to £6.56 per hour
- 16 to 17-year-olds – from £4.55 to £4.62 per hour (Aged under 18 but above compulsory school leaving age)
- Apprenticeship rate – from £4.15 to £4.30 per hour
Minimum Umbrella Rate
Sapphire’s minimum umbrella/limited rate of pay based on 40 hours per week will increase by £0.25 per hour, taking into account the additional employment costs associated with the NLW increase. Please contact us if this affects you and we can provide further detail.
- The Coronavirus Job Retention Scheme (CJRS) will be extended until the end of September 2021, although no support for contingent Employers announced
- Employers will have to contribute 10% in July and 20% in August and September on top of the employment costs they are already paying if still claiming under the CJRS
- Support for the Self-Employed (SEISS) also to be extended to September, with more than 600,000 additional Self-Employed individuals becoming eligible if they filed their 2019/20 Self-Assessment
- The fifth (and final) SEISS grant covering May to September will only be paid at 30% (capped at £2,850) of profits where turnover has fallen by less than 30% during the pandemic
- Business rates holiday to continue until the end of June, with a 75% discount thereafter
- The Universal Credit uplift of £20/week will be extended for 6 months
- Working Tax Credit claimants will get a £500 one-off payment
- Stamp Duty holiday extended in England and NI to the end of June, with no tax charged on sales less than £500,000. This reduced to £250,000 from 1st July before returning to the pre-pandemic threshold of £125,000
- Recovery Loan Scheme launches on 6th April 2021 and runs until 31st December 2021 so that businesses can continue to gain access to government-backed (80%) loans
- Income tax exemptions and NICs disregards for COVID-19 antigen tests and home office equipment provided or reimbursed by Employers will be extended to the 2021/22 tax year.
- The Statutory Sick Pay (SSP) rebate which allows eligible Employers to reclaim up to two weeks of SSP for employees who are absent for COVID-19 related reasons will continue until the Government set out further steps for closing this down
- Employers in England who take on a new apprentice between 1st April and 30th September will receive £3,000 per new hire, which is in addition to the £1,000 paid for 16-18-year-old apprentices currently.
- As widely anticipated, Corporation Tax will rise from April 2023 to 25%
- This will not impact businesses who have annual profits of £50,000 or less
- Companies with profits between £50,000 and £250,000 will be taxed at the main rate of 25% but will be able to claim marginal relief
- From 1st April 2021 for two years companies investing in qualifying new plant and machinery will benefit from new first-year capital allowances
- Under this measure, investments in main-rate assets will be relieved by a 130% super-deduction, whilst investments in assets qualifying for special rate relief will benefit from a 50% first-year allowance
- The Hospitality and Tourism sectors reduced rate of 5% extended until the end of September, increasing to 12.5% from 1st October for 6 months to help ease the rise back to 20% eventually
- The current VAT registration threshold will remain at £85,000 until April 2024
- As previously announced, VAT deferral allows businesses who deferred their VAT last year the option to make repayments over 11 months interest-free rather than paying in full on 20 March
Other frozen thresholds /duty
- Inheritance tax
- Pension lifetime allowance
- Annual capital gains tax exemption
- Fuel & Alcohol
For more information & guidance on the 2021 March budget, please get in touch.