The Budget 2021

The Chancellor’s Budget speech had far less in it than had widely been expected. In short – there were no tax rises (other than corporation tax).

Here are some of the key points:

Stamp Duty Land Tax

The temporary increase in the residential SDLT Nil Rate Band to £500,000 has been extended to 30 June 2021. From 1 July 2021, the Nil Rate Band will reduce to £250,000 until 30 September 2021 before returning to £125,000 on 1 October 2021.
The non-resident surcharge for SDLT (2% on top of existing rates) has been confirmed and will come into effect for transactions completing on or after 1 April 2021.

The income tax personal allowance will be frozen at the April 2021 level (at £12,570) and the threshold for starting to pay the higher rate is frozen at £50,270. They will both be frozen until April 2026.
The capital gains tax annual exempt amount is frozen at the April 2021 level (£12,300). No announcement was made regarding general CGT rates, or to entrepreneurs’ relief.
The inheritance tax nil-rate bands will remain at existing levels until April 2026. The nil-rate band will continue at £325,000, the residence nil-rate band will continue at £175,000, and the residence nil-rate band taper will continue to start at £2 million. Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.

The rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be a gradual taper of rates from 19% to 25% for relief for businesses with profits between £50k and £250k.
The VAT registration threshold will not change until April 2024, being frozen at £85k.
The temporary reduced rate of VAT of 5% for hospitality, holiday accommodation and attractions will continue until 30 September 2021. This will be followed by a new reduced rate of 12.5% from 1 October 2021 until 31 March 2022.
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This so-called “super-deduction” effectively allows companies to cut their tax bill by up to 25p for every £1 they invest.

The Budget document makes a reference to the introduction of a new package of measures to strengthen existing anti-avoidance rules, but without saying exactly what will be introduced.

The government has announced the creation of freeports around the country. The Freeports will contain areas where businesses will benefit from more generous tax reliefs, customs benefits and wider government support.
- the purchase of land or property within Freeport tax sites in England will be exempt from SDLT. The exemption will apply to land or property purchased and used for a qualifying commercial purpose. The relief will be available until 30 September 2026;
- businesses in freeports will also be exempt from business rates until 30 September 2026;
- an enhanced 10% rate of Structures and Buildings Allowance for constructing or renovating non-residential structures and buildings within freeport areas. To qualify, the structure or building must be brought into use on or before 30 September 2026.