Understand what the 2021 Budget means for your business
The main Corporation Tax rate for company profits over £250,000 will be 25%, with companies with profits under £50,000 continuing to be taxed at 19%. Profits in between these limits will be taxed at a tapered rate. A rise in Corporation Tax rates was widely expected, though this will not come into effect until the financial year starting 1st April 2023.
The main Corporation Tax rate will remain at 19% until 1st April 2023, when it will increase to 25% for companies with (non-ring fenced) profits over £250,000.
A new small profits rate of 19% will also come into effect on 1st April 2023 for companies with profits lower than £50,000. Companies with profits between £50,000 and £250,000 will be charged Corporation Tax at a tapered rate.
These profit limits will be proportionately reduced for short accounting periods or where a company has one or more associated companies.
We expect businesses to give more consideration to the payment of dividends compared to bonuses.
Once this change has been substantively enacted under the Finance Bill 2021, businesses will need to ensure their deferred tax calculations reflect the change in tax rate.
When will it apply?
From 1st April 2023
A temporary 130% super-deduction will be introduced for two years for companies that incur qualifying plant and machinery expenditure from 1st April 2021. A first year allowance of 50% will also be available for expenditure on items that would usually attract the special rate of relief of 6%. These reliefs will not be available for expenditure in connection with contracts entered into prior to 3rd March 2021.
The super-deduction will provide companies with a deduction that exceeds the cost of the qualifying asset. Not all expenditure will qualify. Used and second-hand assets will be excluded and the general first year allowances exclusions will apply.
Companies will also be required to recognise disposal proceeds as balancing charges, where the super-deduction has been claimed.
The introduction of these reliefs is welcome and demonstrates the Government’s commitment to encouraging investment. This could generate substantial tax savings and tax repayments for companies to reinvest.
When will it apply?
From 1st April 2021 for two years.
Apprenticeship Incentive Payments
Additionally, the Government are doubling the incentive payments businesses will receive for hiring new apprentices to total of £3,000. This is to hopefully triple the amount of apprenticeship schemes throughout the UK. If you are looking to incorporate apprentices into your organisation, remember that they are classed as an employee and subsequently have the same rights as your employees.
As we see our Trusted Installers continually growing, many will turn to bringing in school and college leavers to train and build the future of their companies.
This incentive scheme will assist in ensuring you have the workforce in place to strengthen your reputation amongst your peer companies.
Let us know your comments on what the budget means for you!
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