What does Spring Budget 2021 mean for you?

by | Mar 11, 2021 | Blog

The question on most people’s lips before Spring Budget 2021 was how will the Treasury recoup more than £280 billion spent on protecting the economy from the financial fallout of COVID-19 since March 2020?

To start with, stealth tax grabs involving the pensions lifetime allowance and income tax are the initial surreptitious ways of chipping away at the UK’s colossal COVID-19 debt.

The pensions lifetime allowance has been frozen at £1,073,100 for the next five years, starting on 6 April 2021. This usually increases in line with the Consumer Prices Index rate of inflation for September the previous year.

As a result, potentially huge numbers of pension savers face being hit with a 55% tax charge if they withdraw anything above this limit as a lump sum. If taken as income, tax will be charged at 25%.

Chancellor Rishi Sunak has increased the personal allowance from £12,500 to £12,570 from 6 April 2021, while the higher-rate also rises from £50,000 to £50,270.

These income tax rates, however, will be frozen until 2026.

This will inevitably push many taxpayers into a higher tax bracket over the next five years, resulting in them paying considerably more income tax.

COVID-19 understandably grabbed the headlines of last week’s Spring Budget 2021, with extensions to the furlough scheme and self-employed income support scheme (SEISS) among the measures announced.

For the self-employed

The fourth taxable SEISS grant will continue to be worth 80% of three months’ average monthly trading profits. This will cover the three months between February and April 2021 and be worth up to £7,500.

If you filed a 2019/20 tax return through self-assessment before midnight on 31 January 2021, you will be eligible to claim this fourth grant. The Treasury said you can submit your claim from late April.

A “fifth and final” SEISS grant will then cover May to September 2021. If your turnover has fallen by at least 30%, you will be eligible to claim the full £7,500. If turnover fell by less than 30%, you can claim up to £2,850.

For employers

The furlough scheme continues in its current form until 30 June 2021. Beyond then, employers will need to contribute towards a furloughed worker’s unworked hours. This starts at 10% from 1 July, rising to 20% on 1 August until the scheme is due to end on 30 September 2021.

Employers of low-paid workers also need to be aware of changes to the national living wage. This increases to £8.92 from 1 April 2021 – and applies to over-23s for the first time. It currently applies to over-25s.

Employers have also been offered £3,000 for every new apprentice they take on between 1 April and 30 September 2021. This is separate to the existing £1,000 incentive for offering apprenticeships to 16 to 18-year-olds.

For retailers

Businesses in the retail, hospitality and tourism sectors will benefit from a three-month extension to the business rates holiday in England. This applies from 1 April to 30 June 2021. From 1 July 2021, local authorities will charge business rates at 33% until 31 March 2022.

Non-essential retail businesses can also obtain restart grants of up to £18,000 per premises. This aims to help a range of firms reopen once lockdown restrictions are lifted.

Get in touch

If you want to discuss any of the tax changes announced in Spring Budget 2021, email advice@dunkleys.accountants or call us on 01454 619900. We will be more than happy to help.

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