Corporate Tax

Company tax hike, gross sales tax lower for closely affected sectors expanded and earnings tax thresholds frozen

UK budget 2021: corporation tax hike, sales tax cut extended for badly affected sectors and income tax thresholds frozen

Chancellor Rishi Sunak presented the budget for 2021 in the lower house.

The UK economy contracted 10% in 2020.

700,000 people have lost their jobs since the Covid-19 pandemic began.

As expected, there are new measures in place to help businesses, major corporate tax changes and a future freeze on personal allowances and tax bands, and additional support as part of COVID-19.


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Here are the main points:

1. No increase in income tax, capital gains tax, social security and inheritance tax


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Personal tax breaks will be increased to £ 12,570 from next year and the higher tax threshold will be increased to £ 50,270 before being frozen through April 2026.

There is no increase in the annual CGT exemption so it stays at £ 12,300 which means that each year only capital gains are taxed above this amount.

The inheritance tax threshold remains unchanged and unchanged at £ 325,000. A tax of 40% is levied on this amount.

2. Increase corporate income tax to 25% in 2023


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Currently, the corporate tax rate that all companies pay on their taxable profits is 19%.

From April 2023, the corporate tax rate will increase to 25%. However, companies with earnings less than £ 50,000 will continue to pay 19% tax, which is known as the “small rate of return”.

Companies with profits up to £ 250,000 have cyclical and hybrid corporate tax rates from 19% to 25%.

Only companies with profits over £ 250,000 will pay the new 25% tax rate, which is only 10% of all UK companies.

The government has announced a new incentive for companies investing in new equipment, etc. (capital relief). Currently, most companies can claim 100% of the purchase price for this device. Under the new system called “Super Deduction”, all companies can claim 130% of the acquisition costs.

3. VAT cut extended by 6 months for hard hit sectors


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The 5% VAT rate for the hospitality sector is to be extended until September 30, 2021. From October 1, 2021 to March 31, 2022, an intermediate rate of 12.5% ​​will be charged in this industrial sector. From April 1, 2022, the rate will reset to the standard rate of 20%.

The VAT registration threshold of £ 85,000 will remain at this level for the next two years.

4. Holiday program extended until September 2021


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As expected, the vacation program for companies that support their employees during this difficult time will continue the support and entitlements through September 2021.

Similarly, the self-employed income support scheme has been extended to September, with a fourth claim shortly covering February, March and April, and a fifth and final claim being made later in July. For those who were newly self-employed in 2019/20 and missed the first three benefits claims, provided that the person filed a tax return for 2019/20 by the end of February, they are entitled to claims according to the 4th and 5th claims.

This is good news for retailers as additional grants of up to £ 6,000 per location are available. Grants of up to £ 18,000 per location are available for gyms and similar industries opening later this year versus other non-essential retail stores.

5. Stump Duty Holiday extended by 3 months to June 30, 2021


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The stamp duty leave, which was supposed to end on March 31, 2021, has been extended by 3 months and will now end on June 30, 2021.

6. New Rule To Stand By Homebuyers: A Mortgage Guarantee


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New 95% mortgages will be available immediately as many lenders have already signed up to the program. This is available to everyone, not just first time buyers, but borrowing is capped at £ 600,000.

7. Planned increase in frozen alcohol obligations


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All alcohol duties have been frozen. The planned rate hikes for spirits such as scotch whiskey, wine, cider and beer are canceled.

8. Planned increase in fuel taxes canceled


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The proposed fuel tax increase has been repealed.

In the meantime, the contactless payment limit will increase to £ 100 later this year. The minimum wage is set to rise to £ 8.91 an hour from April 2021.

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