Personal Tax rates and National Insurance have been untouched for the coming year. The main points of interest relate to covid relief schemes which are covered separately.
Losses can now be carried backwards for up to three years, which will be a welcome cash flow advantage to businesses that have been battered by the past 12 months. The ability for the self employed operating outside of a company structure to be able to recover taxes paid in previous years will be attractive, but it is important to consider whether the cash in the hand now is actually better than the relief against potentially increased profits and taxes in the future. This equation will vary on a case by case basis.
The “super deduction” announced for companies is not available to sole traders and partnerships, but the Annual Investment Allowance which gives 100% write off of expenditure on equipment up to £1 Million is still in place until the end of 2021.
Six hundred thousand businesses made use of the deferment option for the VAT that would have been payable between March and June 2020 and the cash tied up in that deferment is estimated to be in the region of £34 Billion. The treasury is obviously keen to get that money in the coffers as soon as possible now, but appreciates that cash flow can still be an issue for many businesses.
Prior to Budget Day a payment plan option was announced to allow the deferred VAT to be spread over up to 11 months. There was a further prompt to make arrangements to settle in the Budget with a 5% penalty applying to any deferred VAT that is not settled by 30 June, unless there is a prior agreement with HMRC for a payment plan.
If you still have deferred VAT to pay, contact HMRC without delay to make sure that you don’t get caught out with this penalty.
There is anecdotal evidence of problems with making the deferred VAT payments, as HMRC do tend to refund payments that they are not perhaps expecting. If you are intending to settle the deferred VAT it is probably worth checking with HMRC that they are expecting the payment to be made.
The reduced rate of VAT for the hospitality industry is to continue, being gradually brought back into line with standard rates over the coming year.