Following the UK Budget announcement for 2021, BDO Guernsey tax director Mark Savage explores what the Budget means.
This year, the pressure is on to address how the UK will pay off the large debts accrued during the pandemic and how to support the people and businesses hit the hardest. Chancellor of the Exchequer Rishi Sunak outlined the state of the economy and outlook for the future with details of the government’s plans for business, property and personal taxes.
Mark said: “Understandably focused on recovering from the pandemic, the UK Budget outlines key factors and fiscal measures to help propel the economy forward while safeguarding sectors that have struggled.
“The Chancellor has ensured that most pandemic-related support measures, including the Stamp Duty Land Tax (SDLT), business rates and targeted VAT reductions, remain in place until the end of September, with interim measures in place, before a return to pre-pandemic levels in April 2022.
“The headline-grabbing tax measures are a freeze in most personal tax allowances from 2022 onwards and the rise in corporation tax rates to 25% in 2023 (from 19%) albeit with a reduced rate for smaller companies.
“The effect of the small companies rate, however, means that some medium-sized companies will pay tax at a marginal rate of 26.5%. This could affect a number of Guernsey companies subject to UK corporation tax, such as those owning UK property. It was also confirmed that Guernsey and other non-UK resident purchasers of UK residential property will pay an SDLT surcharge of 2% on top of usual UK rates from 1 April this year.
“There was some good news for companies. The Chancellor announced a change to enable some losses to be utilised more quickly and thereby generate cashflow. Perhaps more interestingly, he has also allowed a super-deduction of 130% of the cost of new plant and equipment to be set against tax.
“It will be interesting to see if the effects of these decisions will allow the UK economy to grow quickly enough to service the incredible amount of debt it has taken on to fund its pandemic response”.