Budget 2021

How the 2021 Budget may affect your business

Business owners throughout the UK have had an anxious wait to see what the new measures and actions will hold.

Chancellor Rishi Sunak’s 2021 budget has announced important changes for businesses, including changes to Corporation Tax and Capital Assets.

Changes to Capital Assets

A new tax relief has been announced, duped a ‘super deduction’, aimed to encourage investment into the UK in the hope of driving recovery from the pandemic. Starting this April and continuing for a full two years until March 2023, this announcement offers a huge boost to both manufacturing and construction firms throughout the UK.

Those who invest into plant and machinery assets which fit the guidelines of qualification will benefit from a first-year capital allowance of 130% and 50% first-year allowance on qualifying special rate assets. For companies who invest, this could mean a tax saving of 25p for every £1 invested. This size of cut in tax has never been seen in the UK before.

Although the details are yet to be finalised, this announcement could help provide confidence to investors who may be more willing to invest sooner rather than delaying.

Changes to Corporation Tax

The already expected changes in corporation tax from 19% to 25% have been confirmed. Although a large rise, it will not be coming in to effect until April 2023.

Although not a particularly welcome move for businesses who are profitable, it will not affect those who are struggling due to its nature as a tax on profits. Those who are considered small businesses with profits of £50,000 or below, will continue to pay corporation tax at the rate of 19% as they will be subject to a ‘small profits rate’. For those companies who earn above £50,000 in profits, there will be a threshold of the tax they will pay, with companies who earn profits in excess of £250,000 paying the full rate of £25%.

VAT, IR35 and tax on losses

For a temporary period, businesses will have the ability to carry back trading losses for relief against profits from earlier years in order to receive a repayment of tax paid. This period will be extended from 1 year to 3 years, and will have a cap on the amount which can be carried of £2million for the next two years. This will provide companies with the flexibility to offset losses they have incurred and enable the to claim additional tax repayments.

The IR35 off-payroll reforms has been announced to continue as previously planned and the VAT threshold will maintain at £85,000 until April 2024.

There has been announced a change to the definition of ‘intermediary’. This is to ensure businesses are not caught out under the legislation, such as umbrella companies and employment agencies.

We here at NEXA Accountants understand that all these changes can get very confusing and complicated. That is why we offer free consultations with our team of dedicated experts. If you have questions or concerns on how these changes may affect you business, give NEXA Accountants a call today and see how we can help.