Hazlewoods expert insight: Financial analysis on the Budget 2021

From stealth tax, support grants and business rates holidays to furlough extensions and stamp duty delays, reputed Gloucestershire accountants Hazlewoods, shares its expert financial analysis of Rishi Sunak's March 2021 Budget - and what it means for county businesses.

Hazlewoods' Nick Haines selects the notable financial announcements made in the spring Budget 2021.
Hazlewoods' Nick Haines selects the notable financial announcements made in the spring Budget 2021.

Despite a lot of media speculation about potential capital gains tax rate increases and the introduction of wealth taxes, in his Budget, the Chancellor did the sensible thing and focused on the economic recovery, rather than hitting an already beleaguered nation with a huge swathe of tax rises, according to Nick Haines.

With support at the forefront of Rishi Sunak’s speech on Wednesday 3 March 2021, the Budget aims to get us through what is, hopefully, the last phase of the coronavirus pandemic.

About the expert – Nick Haines, tax partner at Hazlewoods LLP

Nick Haines

With 23 years of experience, Nick Haines heads up the tax and property teams at Hazlewoods, assisting his clients with both their compliance and planning requirements.

Nick advises on numerous taxes (but not VAT!) and he is the Gloucestershire accountancy firm’s SDLT specialist. Whilst a number of his clients are in the property sector, tax affects everyone and he can assist from basic personal tax needs right through to complex corporate restructuring.

For more information, visit hazlewoods.co.uk.

Grants for businesses in the Budget 2021

Grants of up to £6,000 per non-essential retail business are to be provided, with those in hospitality and personal care businesses being provided with a grant of up to £18,000, to try to kick start their recovery. Added to that is an extension to the business rates holiday for three months, from 1 April 2021, with a two thirds reduction for the following nine months.

What was the Budget 2021 impact on property purchasers?

In a widely expected move, Mr Sunak extended the SDLT ‘holiday’ of the £500,000 nil rate band until 30 June 2021, then tapering it down to £250,000 until 30 September 2021, before it returns to its normal £125,000 level.

How are they going to repay their borrowing?

The figures for the economy and borrowing were alarming before the further support was announced, with £355 billion having been borrowed over the last year to provide the £352 billion support provided to date, with a further £234 billion being anticipated in the next fiscal year, to continue the support. The fact that a 1 per cent increase in inflation and interest rates will cost the country £25 billion extra, shows the need to reduce the debt levels as quickly as possible.

So, how is Rishi planning to achieve that? Not through obvious tax rises as rates of income tax, national insurance and VAT are staying at their current levels. Instead, ‘stealth tax’ rises will come into play, with the freezing of the personal allowances/exemptions for income tax, capital gains tax, inheritance tax and pensions allowance, from 2021/22 until 2026.

The one tax that was announced as rising was corporation tax, but not until 2023. This will rise to 25 per cent, but with a new small companies’ threshold of £50,000, where the rate remains 19 per cent, whilst those in the band between £50,000 and £250,000 will be at a ‘marginal rate’ of 26.5 per cent.

Were there any reliefs for companies in the Budget 2021?

In taking away with one hand, he immediately gave back with another, announcing an extension of loss carry back, for all businesses, from one year to three years, acknowledging the impact the pandemic has had on many businesses.

But the bigger announcement came in the form of a new ‘Super Deduction’ to get corporates investing again. In a move he heralded as being ‘the biggest tax cut ever’, companies (and only companies) will benefit from 130 per cent relief for investment in qualifying plant and machinery and a 50 per cent first year allowance for those that fall in the ‘special rate’ category.

What else is the Chancellor planning?

There were further announcements to kick start the economy, with relaxed rules on migrants to bring in the brightest brains and ‘help to grow’ programmes for management and digital training. There was also the creation of eight freeports, with the aim of these being lower tax areas, to aid investment, generate jobs and build businesses. The details of these remain to be seen but are an exciting, if experimental, policy.

With spring almost upon us, Mr Sunak is hoping these announcements will herald the green shoots of recovery for the economy, we should all drink to that.

For more information about Hazlewoods, visit hazlewoods.co.uk.

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