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Last updated: 3 Mar 2021
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Spring Budget 2021

The Chancellor’s Spring Budget focused on the COVID-19 pandemic and “doing whatever it takes”, with extensions of the wide range of support to businesses and individuals that have been the government’s financial response.

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Read advice and insight on changes announced in the Spring Budget from our team of sector specialists . Click below to read the news relevant to you.

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Tax rises to pay for the pandemic - but not yet, and not CGT

Many currently closed businesses will benefit from restart grants and the availability of a new Recovery Loan Scheme, while those rushing to buy homes will benefit from an extension of the Stamp Duty (SDLT) ‘holiday’ until the end of June, with a tapered return to normal thereafter. The hospitality and tourism sector will also retain the benefit of the 5% VAT rate for the summer season, and then a special 12.5% rate until next March. 

Businesses received good news by way of a relaxation of the loss carry back rules, which could generate up to £760,000 of tax repayments for companies, and a new ‘Super Deduction’ of 130% of amounts invested in new equipment. The devil will be in the detail, but it is hoped that this will unlock significant business investment. 

Freeports were mooted during the lead up to Brexit, will become a reality, with eight ports in England being announced to benefit from advantageous tax regimes to encourage investment and jobs. Announcements of ports in the devolved nations are expected to follow. 

And Capital Gains Tax (CGT) remains unchanged despite months of speculation and a rush of transactions to beat an anticipated rate rise. Does the risk of a rate increase bring forward enough tax to avoid the need for an increase? Or perhaps the Chancellor is waiting for a more fundamental review of capital taxes as recommended by the ‘Tax after coronavirus’ report released on 1 March. 

It was not all good news for taxpayers though. 

The personal allowance and higher rate threshold (in England Wales and Northern Ireland) will be frozen from 2021/22 to 2025/26. As will the Inheritance Tax nil rate band, CGT annual exemption, pensions lifetime allowance and VAT registration threshold – tax rises without breaking the government’s tax triple lock. Corporation tax will increase to 25% for companies with profits of £250,000 or more, but not until April 2023.  

A number of tax consultations will be announced on 21 March and consultations into the Research & Development tax credit and Enterprise Management Incentive regimes were announced today. Is the aim to enhance the reliefs or cut them back? 

Responses to COVID-19 so far have been met by ‘is it enough?’ and that question remains. But, while the delays in tax rises are welcome, a further question is added this year: are we starting to pay for the pandemic too soon? 

About the author

Alastair McQuater

+44 (0)20 7556 1427
mcquatera@buzzacott.co.uk

Tax rises to pay for the pandemic - but not yet, and not CGT

Many currently closed businesses will benefit from restart grants and the availability of a new Recovery Loan Scheme, while those rushing to buy homes will benefit from an extension of the Stamp Duty (SDLT) ‘holiday’ until the end of June, with a tapered return to normal thereafter. The hospitality and tourism sector will also retain the benefit of the 5% VAT rate for the summer season, and then a special 12.5% rate until next March. 

Businesses received good news by way of a relaxation of the loss carry back rules, which could generate up to £760,000 of tax repayments for companies, and a new ‘Super Deduction’ of 130% of amounts invested in new equipment. The devil will be in the detail, but it is hoped that this will unlock significant business investment. 

Freeports were mooted during the lead up to Brexit, will become a reality, with eight ports in England being announced to benefit from advantageous tax regimes to encourage investment and jobs. Announcements of ports in the devolved nations are expected to follow. 

And Capital Gains Tax (CGT) remains unchanged despite months of speculation and a rush of transactions to beat an anticipated rate rise. Does the risk of a rate increase bring forward enough tax to avoid the need for an increase? Or perhaps the Chancellor is waiting for a more fundamental review of capital taxes as recommended by the ‘Tax after coronavirus’ report released on 1 March. 

It was not all good news for taxpayers though. 

The personal allowance and higher rate threshold (in England Wales and Northern Ireland) will be frozen from 2021/22 to 2025/26. As will the Inheritance Tax nil rate band, CGT annual exemption, pensions lifetime allowance and VAT registration threshold – tax rises without breaking the government’s tax triple lock. Corporation tax will increase to 25% for companies with profits of £250,000 or more, but not until April 2023.  

A number of tax consultations will be announced on 21 March and consultations into the Research & Development tax credit and Enterprise Management Incentive regimes were announced today. Is the aim to enhance the reliefs or cut them back? 

Responses to COVID-19 so far have been met by ‘is it enough?’ and that question remains. But, while the delays in tax rises are welcome, a further question is added this year: are we starting to pay for the pandemic too soon? 

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