A summary of the key Budget announcements for employers and employees is set out below.
It should be noted though that we expect a number of consultations to be published on 23 March 2021. These consultations are likely to set the direction for the Government’s tax policy in the medium term. While no details have been announced, we would expect that the consultations might cover revenue raising measures as well as matters such as climate policy, the treatment of employees and the self-employed and the outcome of the Office of Tax Simplification’s review of capital gains tax.
Employment Support Measures
As expected, the Chancellor has revisited his “Plan for Jobs”, first announced in his Summer Economic Update on 8 July 2020, and has announced as follows:
Coronavirus Job Retention Scheme (CJRS)
The current CJRS, which was due to close at the end of April 2021 has now been extended to the end of September 2021. The support level provided to employees will not change (80% of usual wages capped at £2,500 per month for hours not worked), however, from July employers will need to contribute 10% of usual wages and 20% for August and September. This is in addition to the employer National Insurance Contributions and Pension Contributions that employers are currently bearing for furloughed employees.
As a result of this welcome extension, for claims for periods from 1 May 2021 onwards, employers will now be able to claim for eligible employees who were on their payroll on 2 March 2021. This means they must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying HMRC of earnings for that employee.
While a Taxpayer Protection Taskforce had been referred to prior to the Budget, the Chancellor announced over £100m of additional funding to HMRC for the creation of this Taskforce, which will pay for 1,265 investigators to tackle “fraudsters that exploited UK Government Support Schemes” which includes the CJRS.
A number of schemes to support training and apprenticeships had already been introduced and planned before today, with further incentives announced today. The cash grant for businesses taking on an apprentice is to increase to £3,000, and this will apply regardless of the age of the apprentice. In addition, there will be cash grants of £1,000 per trainee available for businesses taking on trainees aged 16-24 for work experience, and apprentices will be able to be attached to more than one employer a - “flexi-apprenticeship programme”.
Alongside that, there will be access to the newly announced Help to Grow programmes providing management and digital training for small and medium sized businesses, who can register from today.
Statutory Sick Pay (SSP)
The SSP Rebate Scheme for up to two weeks of eligible COVID related SSP costs per employee for small and medium sized employers will continue. No end date has been given for this extension but more details will be provided by the Government in “due course”.
Personal Allowance and higher rate threshold
The standard Personal Allowance for the tax year 2021/2022 will increase to £12,570 and the higher rate threshold will increase to £50,270. Both will remain at this level until April 2026.
National Insurance Contributions (NIC)
The NIC lower earnings limit (nil band primary threshold) will increase to £9,568 from 6 April 2021.
The NIC lower earnings limit secondary threshold (applicable to Employer NIC) will increase to £8,840 from 6 April 2021.
It was also announced that there will be Employer NIC relief in relation to eligible employees in all Freeport Tax Sites (sites named today) from April 2022 until April 2026, with the possibility of extension to April 2031 subject to review.
National Living Wage and National Minimum Wage
The Government has confirmed the increases (first announced in November 2020) to the National Living Wage (NLW) and the National Minimum Wage (NMW) from 1 April 2021 (and, as previously announced, the NLW will apply to those aged 23 and above, down from the current age of 25):
NLW (age 23+): increase from £8.72 to £8.91
NMW (age 21-22): increase from £8.20 to £8.36
NMW (age 18-20): increase from £6.45 to £6.56
NMW (under 18): increase from £4.55 to £4.62
Apprenticeship Wage: increase from £4.15 to £4.30
The Government has also re-confirmed its target for the NLW to reach two-thirds of median earnings by 2024, as well as to further extend NLW eligibility to those aged 21 and over.
Changes to the NMW Regulations will also impact on what employers need to do to comply with the NMW rules over the coming months. In particular workers may now be re-categorised as “salaried workers” for the purpose of NMW leading to differences in the pay and hours that need to be included within an NMW calculation and communication to workers regarding their new calculation year.
Company cars and vans
The benefit in kind charge for private fuel provided for company cars and vans, and the van benefit charge, will increase in line with CPI from 6 April 2021.
Extension to benefits relief
The tax and NI exemption for COVID-19 antigen tests, whether provided by an employer or where they are reimbursed, will continue in the 2021-22 tax year. In addition, relief for the reimbursement of home office equipment will also be extended in the 2021-22 tax year. The easement of the requirement to cycle to work using Cycle to Work Schemes, will continue as planned until April 2022 on the basis that eligibility requirements have been met.
Capital Gains Tax
Despite some speculation, no changes were announced to the capital gains tax rate or to business asset relief. The annual allowance is unchanged at £12,300 and will remain at that level until at least April 2026.
Enterprise Management Incentives (EMI) - call for evidence
The Government has published a call for evidence on the EMI tax-advantaged share option scheme “to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme”. Qualifying EMI options can access the 10% CGT rate under Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), making these an extremely attractive incentive for fast-growth businesses to offer to their employees. However, there are a number of conditions that limit the companies that can use them, including a 250 employee limit and a £30 million gross asset limit. In the call for evidence, the government seeks views on, among other things, how the EMI rules could be changed to help more companies.
Pensions Tax Relief
The standard lifetime allowance (“LTA”) of £1,073,100 will be frozen at its current level until at least 5 April 2026. HMRC commented that “Where individuals now breach the lifetime allowance, some may reduce their hours or retire earlier than they want to, to stay within the lifetime allowance.”
Had the LTA increased in line with CPI it would have closed the gap between the standard LTA and protected lifetime allowances that some people hold, eroding the value of the protection over time. Freezing the standard LTA for five years means that these grandfathered protections now maintain their value.
The annual allowance (“AA”) remains unchanged at £40,000 for 2021/22 as does the money purchase annual allowance at £4,000, and the tapering of the annual allowance. Tapering starts when threshold income exceeds £150,000 and adjusted income exceeds £240,000. It reduces the AA by £1 for every £2 of income above £240,000, down to a floor level of £4,000 for the AA when adjusted income exceeds £312,000.
Pension funds’ investments
The government’s Build Back Better strategy announced alongside the Budget promised to improve access to finance for innovation by “reforms to address disincentives for pension funds to invest in high-growth companies”. The government’s view is that there remains a largely untapped pool of capital from institutional investors, particularly Defined Contribution (DC) pension schemes.
So it will consult in the next month on whether certain costs affect DC pension schemes’ ability to invest in a broader range of assets. This is to ensure DC pension schemes are not discouraged from investments such as venture capital and growth equity, as part of a balanced portfolio.
The DWP will also come forward with draft regulations to make it easier for schemes to take up such opportunities within the charge cap on the default investment fund for DC auto-enrolment workplace pension schemes by permitting the smoothing of certain performance fees over a multi-year period.
Globally mobile employees
The Chancellor has announced a variety of reforms to the immigration system including the introduction of new visa categories together with changes to existing rules. The changes include:
- Publishing a roadmap this summer on streamlining visa sponsorship processes
- Introducing a new “elite points-based visa” for unsponsored highly skilled migrants, including a fast-track route for recognised scale up businesses - with a focus on technology, science and research
- Expanding the qualification criteria for the Global Talent route to automatically include global prize winners (Spring 2021) and winners of international scholarships and other elite programmes for early promise (Autumn 2021)
- Launching a new single sponsored Global Business Mobility route for overseas businesses wishing to establish a presence or transfer staff to the UK (by Spring 2022)
- Reviewing the existing Innovator route to streamline the process for those wishing to found a business in the UK to obtain a visa to do so
Full details on these changes will be announced by UK Visas and Immigration (UKVI).
Pensions Tax Relief
The freeze in the level of the standard lifetime allowance reported above in relation to pensions tax relief may also have an impact on globally mobile individuals, in particular those who join or remain in UK pension plans. This measure may bring further impetus to any review of policies on tax efficient ways of delivering long term remuneration. However, employers should also consider which of their globally mobile employees may benefit from the non-resident enhancement to the lifetime allowance.
Income tax rate bands
Costs of tax equalised assignments into the UK will be unchanged (but will become relatively more expensive) as the annual allowance and higher rate tax band remain will not change from 6 April 2021 to 6 April 2026.
Stamp Duty Nil Rate Band
It was announced that the increased nil rate band for SDLT (in England and Northern Ireland) on residential properties of £500k will remain in place until 30 June 2021, before dropping to £250k until 30 September 2021 when it will return to £125k. Employers of UK non-resident individuals will note that the previously announced measures to introduce new rates of SDLT for non-residents will be 2% higher than those for resident individuals. These rules come into force as of 1 April 2021.