Rishi Sunak delivered his budget today, with one or two big surprises. Many expected the covid support schemes to continue, as well as an extension to the cut in Stamp Duty Land Tax and the reduced rate of VAT. Although an increase in corporation tax was on the cards, a rise to 25% was unexpected. More details to follow, but the main points affecting taxpayers are:
No increase in income tax rates, but the personal allowance is frozen for the next 4 tax years at the current level. There will be an inflationary increase taking it from £12,500 to £12,570.
The level at which taxpayers start to pay higher rate tax is also frozen with a small increase for inflation to £50,270.
This means that as income start to rise, people will fall into the higher rate tax bracket.
5% VAT for restaurants and hotels
The VAT reduced rate for food and non-alcoholic drinks bought from restaurants and cafes will continue until 30 September. It will then go up to 12.5% for 6 months before returning to 20% in April 2022.
Stamp Duty Land Tax (SDLT)
Last summer’s cut in SDLT was due to end on 31 March 2021. It will now be extended to 30 June 2021 meaning the first £500,000 of a house’s purchase price attracts no SDLT.
This will be slowly tapered out throughout summer from July. By 1st October SDLT will be back to pre-Covid rates.
The small companies’ rate has been brought back. Companies with profits of less than £50,000 continue to pay corporation tax of 19% on profits.
Companies with profits above £250,000 will pay 25% on profits from April 2023.
Companies whose profits fall in between, will pay a tapered rate.
Companies with trading losses will be allowed to carry back those losses to the previous 3 years.
A new super deduction, where companies get 130% deduction from taxable profits on amounts invested in plant and machinery.
Furlough extended to the end of September, with employees continuing to receive 80% of their wages but employers will have to contribute 10% in July and 20% in August and September.
Self Employment Income Support Scheme
The scheme will continue with a fourth grant, covering February to April, then a final grant from May.