UK Budget 2021: The Key Points

Today, Chancellor Rishi Sunak announced the 2021 Budget, laying out plans on how the country will recover from the economic effects of coronavirus.

Sunak’s plans detailed how a further £65 billion worth of support will be introduced, as well as several other announcements that will affect businesses, the self-employed and working families. Here is a breakdown of everything you need to know.

Further COVID-19 support

The chancellor delivered some key points surrounding support following coronavirus:

  • Furlough will be further extended up until September 2021. The Government will continue to pay 80% of employees’ wages for hours that they cannot work. Employers will be asked to contribute 10% in July and 20% in August.
  • The self-employed will receive further help as it was announced that the Self-Employment Income Support Scheme will be extended up until September 2021, covering 80% of average trading profits up to £7,500. These schemes will also become more accessible as the access to the grant is widened: if you filed a tax return for the 2019-20 tax year, you will now be eligible to claim for the first time.
  • The £20 uplift in Universal Credit will be extended for another six months. A one-off payment of £500 will be available to eligible Working Tax Credit claimants.

 

Help for businesses

There have been several new plans announced to help businesses:

  • From April 2021, businesses will be able to claim a new Restart Grant to help them open following the coronavirus pandemic. These are a one-off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses. Retail businesses could claim up to £6,000.
  • A new Recovery Loan Scheme was announced, meaning that businesses of any size could get a loan of between £25,001 and £10 million to help businesses through the next stage of recovery.
  • The apprentice hiring incentive has now doubled meaning businesses will now receive a payment of £3,000 if employers hire a new apprentice between 1st April 2021 and 30th September 2021.
  • An additional £300 million in support will be provided to the arts to support theatres, museums and other cultural organisations.
  • The 100% business rates holiday will continue until June and then will be cut by two-thirds for the remainder of the year.
  • A Help to Grow business scheme had been announced to provide free training and discounts on productivity software to help businesses grow – you can apply for the Help to Grow scheme here.
  • All small to medium-sized businesses will be able to continue to claim up to two weeks of eligible Statutory Sick Pay costs per employee from the government.
  • Businesses will be able to carry back losses of up to £2 million for up to 3 years to support cashflow.

 

Taxation

  • The VAT cut for the hospitality sector will stay at 5% until 30th September, at which point it will then change to 12.5% for 6 months until April 2022.
  • Alcohol and fuel duty had been frozen.
  • Corporation Tax will increase to 25% in 2023. Businesses with a trading profit of £50,000 or less will be taxed at 19%. Businesses with profits greater than £250,000 will be taxed at 25%.
  • A new super-deduction will be introduced which will cut companies tax bills by 25p for every pound they invest in new equipment.

 

Housing

  • The Chancellor announced that 95% mortgages will return meaning first-time buyers have the option to buy a home worth up to £600,000 with a 5% deposit
  • The temporary cut in residential Stamp Duty Land Tax (NIL to £500,000) has been extended to 30th June 2021. From 1st July to 30th September 2021, the NIL rate band will be reduced to £250,000 before going back to £125,000 as from 1st October 2021.

 

National Living Wage & personal tax threshold

  • The National Living Wage will increase to £8.91 as of April 2021.
  • The personal tax threshold will freeze at £12,500 up until April 2022, after which point it will increase to £12,570 and then freeze again until April 2026.
  • The higher rate income tax threshold will be frozen at £50,270 from April 2022 to 2026.

 

If you need further advice following the proposed changes announced by Rishi Sunak, you can contact our team today and we will be more than happy to answer any queries you may have.

Construction workers

The Construction Industry Scheme (CIS) and CIS Deductions

The Construction Industry Scheme (CIS) requires contractors to deduct money from payments made to self-employed subcontractors and pass this on to HMRC. The amount taken off is referred to as a CIS deduction – it works as an advance payment on the subcontractor’s tax and National Insurance (NI) contributions.

If you’re a contractor, you must register for the scheme. As a subcontractor, you’re not required to register for the scheme but doing so will reduce your CIS deductions (more on this in the section below).

Over the course of this guide, we’ll cover everything you need to know about CIS and CIS deductions. Starting by explaining who the Scheme applies to, this post goes on to explain how much the deductions should be, how to register, and how to submit returns as a contractor.

 

Who does the Construction Industry Scheme apply to?

CIS applies to all construction contractors who pay subcontractors; it also applies to self-employed subcontractors working in construction and receiving payments from a contractor. If you are employed by a contractor and are subject to PAYE, then CIS deductions do not apply to you.

Most types of construction work are covered by the Scheme. If you’re working on a building, structure, or civil engineering project, then CIS applies.

The type of work involved could be:

  • Building work
  • Decorating, alterations, and repairs
  • Preparing the site
  • Cleaning the inside of buildings after construction work
  • Demolition and dismantling
  • Installation of heating, lighting, power, water and ventilation systems

There are some notable exceptions to CIS. You are not subject to CIS deductions if your work involves:

  • Architecture and surveying
  • Scaffolding hire
  • Carpet fitting
  • Making construction materials
  • Delivery of materials
  • Secondary work on construction sites such as running site facilities

If you’re unsure whether the scheme applies to you or not, visit the Government’s page.

 

How much should CIS deductions be?

For subcontractors who are registered with CIS, the standard rate is 20% of the invoiced amount for work and travel expenses. The total invoiced amount excludes VAT paid and any expenses for materials or tool hire.

In cases where the subcontractor is not registered with CIS, the rate increases to 30% of the invoiced amount (still excluding VAT and materials or tools expenses).

As a subcontractor working in construction, you can claim some expenses back when you fill in your Self-Assessment tax return – take a look at our CIS returns service to find out more.

 

Registering for the Construction Industry Scheme

Contractors that pay subcontractors must be registered for CIS, but we would also recommend that subcontractors register so that they are subject to the reduced deduction rate of 20% rather than 30%.

To register for CIS as a sole trader, head over to the Government’s portal. The following details will be required to complete the registration process:

  • Your legal business name or trading name
  • Your National Insurance Number
  • The unique taxpayer reference number (UTR) for your business or sole trading entity
  • Your VAT registration number (if you’re VAT registered).

If you’re registering as a company, you’ll need to use the online CIS305 form. To register as a partnership, use the CIS304 form.

 

Gross payment status

As a subcontractor, you can avoid having CIS deductions taken by applying for gross payment status when you register for CIS. To qualify for this, you must show that:

  • You’ve paid your tax and National Insurance on time before
  • You work in construction in the UK
  • You take payments through a bank account
  • Your turnover is more than £30,000 (excluding VAT and materials).

If all of these conditions apply to you, then you can apply for gross payment status during the registration process (visit the gov.uk page for more information).

 

Making CIS deductions

Before making a CIS deduction as a contractor, you need to go through the verification process:

  1. Contact HMRC with the details of the subcontractor.
  2. HMRC will check whether the subcontractor is registered.
  3. You will be contacted with the correct CIS deduction rate to apply.

In some cases, HMRC may contact you to advise you that no deduction is required. However, if a deduction is required:

  • First, calculate the total amount by subtracting VAT paid and materials or tools costs from the amount the subcontractor has invoiced. Apply the rate of CIS deduction that HMRC has advised (either 20% or 30%).
  • Make the deductions and send the deducted amount to HMRC.
  • Record details of the payment, material costs, and deduction amount.
  • Send the remaining payment to the subcontractor.
  • Complete a statement of deduction.

The CIS deduction statement should be sent to the subcontractor within 14 days of the end of each tax month.

 

Submitting returns as a contractor

As well as providing CIS deduction statements to their subcontractors, contractors must also submit their monthly CIS return within 14 days of the end of each tax month (this means the return must be submitted no later than the 19th of each month). For example, if you are making a return for the tax month from 6th April to 5th May, the deadline for this will be the 19th of May. 

To do this, you’ll need the following:

  • An email address
  • Your Employer Reference Number (ERN)
  • Your 13-digit Accounts Office reference number

When you’ve got these details together, visit the Construction Industry Scheme (CIS) online service to submit your returns.

 

This guide has explained the Construction Industry Scheme and CIS deductions. If you’re a contractor, we offer a comprehensive CIS returns service and can support you with everything from verifying subcontractors to deduction statements and CIS returns – don’t hesitate to get in touch.

Choosing a Crowdfunding Platform: Top Tips, Taxes, and Fees

As a content creator, crowdfunding platforms offer an easy and accessible way for you to generate an additional source of income through your work. Unlike other revenue streams such as advertising and merchandise sales that you might have explored, it’s easy to get started with crowdfunding straight away and there are no setup costs involved.

To help you pick which one is right for you, this guide explores some of the pros and cons of the main crowdfunding platforms and offers insights based on our accountancy work for content creators.

Working From Home Tax Relief

Millions of us have been working from home due to the COVID-19 pandemic. If you’ve been working remotely, your household bills might have increased over the past few months – and you may even have had to invest in a new broadband connection to support your work. The good news is that you may be able to claim tax relief to help cover the extra cost.

The Government’s working from home allowance scheme began in October 2021 and has already had an impressive uptake: in the first six weeks alone, more than one million people applied to HMRC. In this WKM guide, we explain who is eligible for the new tax relief, the amount you could claim, and how to claim it.

coins stacked up in a pile

The Winter Economy Plan: The Key Points

On the 24th September 2020, Rishi Sunak announced several new schemes to support businesses and workers across the UK as part of his Winter Economy Plan. 

Over the course of this post, we’ll take a close look at the details of each of the new schemes, but we’ve also provided a brief rundown of the main highlights below.

Calculator and balance sheet

The Complete Guide to Director’s Loans

This WKM guide explains what director’s loans are and when you might want to consider making one. It goes on to outline how this type of loan works in practice, exploring the tax implications associated with a director’s loan as well as the repayment process. 

New government grant for small businesses: The Small Business Grant Fund (SBGF)

Yesterday the Minister for Regional Growth and Local Government announced that there would be £20 million in new funding to help businesses across England get back on track due to COVID-19.

Small to medium-sized business in England can receive the Small Business Grant Fund (SBGF) of between £1000-£5000 to be spent on professional services fees to help get business back on track.