The government has published details of Finance Bill 2021 setting out the key measures to be brought into legislation including the super-deduction capital allowance
The Bill will ensure a number of tax changes set out by the Chancellor at last week’s Budget will take effect from the start of the next tax year beginning in April 2021, including:
- the extension of the stamp duty holiday;
- extension of the Coronavirus Job Retention Scheme;
- extension of the Self Employment Income Support Scheme; and
- extending the VAT cut for tourism and hospitality to September.
As the country begins to recover from the effects of the pandemic, the Bill also legislates to help strengthen the public finances in the medium term.
One of the headline announcements at the Budget was the 6% increase in the rate of corporation tax to 25% on profits over £250,000 from April 2023, balancing the need to raise revenue with the objective of having an internationally competitive tax system. Over 90% of businesses will pay less than the 25%.
On personal taxes, the Chancellor has frozen the income tax personal allowance and higher rate threshold at 2021 levels through to 2025.
In addition, the Finance Bill will freeze the capital gains tax annual exempt amount (AEA), the inheritance tax nil-rate band and the pensions lifetime allowance at their current levels.
There will also be a tax on businesses to encourage the use of recycled plastic instead of new plastic within packaging with the introduction of a plastic packaging tax. The rate of the tax is £200 per tonne of plastic packaging which contains less than 30% recycled plastic content.
The Bill sets out plans for reform of the penalty regime for VAT and Income Tax Self-Assessment (ITSA) to make it fairer and more consistent. The new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached.
A number of measures support an investment-led recovery including:
- the super deduction from 1 April 2021 until 31 March 2023. The independent OBR has forecast that, at its peak, the super-deduction will raise the level of business investment by 10%, or roughly £20bn a year.
- a range of tax breaks were also announced to support the introduction of freeports allowing the government to designate ‘tax sites’ in freeports in Great Britain, where businesses will be able to benefit from a number of tax reliefs.
The Bill will now follow the normal passage through parliament.
The 2021 Finance Bill also legislates for other tax changes, previously announced and consulted upon, that were then confirmed at the Budget. Over half of the Bill was published in draft for consultation at Legislation days in July 2020, November 2020, and in July 2018.