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Budget 2021 - How Do the Tax Changes Affect Businesses?

on Thursday, 11 March 2021.

From super-deduction to Corporation Tax, we outline the key tax updates announced by Chancellor Rishi Sunak in the 2021 budget.

Corporation Tax

An increase in the rate of Corporation Tax from April 2023, when the Chancellor expects businesses to be back to their 'pre-pandemic peak'. There will be a tapered increase from 19% for businesses with profits greater than £50,000, up to a maximum rate of 25% for those with profits greater than £250,000. Those with profits of less than £50,000 will pay the current tax rate of 19%. Although it remains to be seen if "close" companies will be able to benefit from the 19% rate.

Super-Deduction

For the next two years from 1 April 2021, businesses that invest in qualifying plant and machinery assets will be able to make a 'Super-Deduction', in the form of a new first-year capital allowance. Under this measure, investments in main-rate assets will be relieved by a 130% super deduction, whilst investments in assets qualifying for special rate relief will benefit from a 50% first-year allowance. So for every pound a company invests, their taxes are cut by up to 25p. The Chancellor is hoping this measure will stimulate business investment in plant and machinery by offering higher rates of relief than were previously available. The Office for Budget Responsibility (OBR) has stated that at its peak, the super deduction will raise the level of business investment by 10%, or roughly £20bn a year.

What Types of Assets Are Included?

  • solar panels
  • computer equipment and servers
  • tractors, lorries, vans
  • ladders, drills, cranes
  • office chairs and desks
  • electric vehicle charge points
  • refrigeration units
  • compressors
  • foundry equipment

Assets must be purchased as new, so used equipment is excluded from the super deduction. Companies should be careful when these assets are subsequently sold. It might be that tax charges could arise aiming to claw back the relief.

Coronavirus Legal Advice

Tax Day

23 March 2021 is now being labelled 'Tax Day', as the Financial Secretary to the Treasury announced that on 23 March the Government will make a number of additional announcements relating to tax policy, including consultation updates. Announcements which have 'fiscal implications' that need to be captured in the fiscal outlook or which require legislation in the Finance Bill were announced on Budget Day (3 March). However, further announcements relating to tax policy and further tax consultations will be published on 23 March. The Treasury's reasoning behind this is 'to give a range of important but less high profile measures greater visibility among, and opportunity for scrutiny by, Parliamentary colleagues, tax professionals and other stakeholders'.

What About Capital Gains Tax?

Prior to the Budget, there was expectation that the Chancellor would increase the rates of Capital Gains Tax (CGT) and/or bring an end to reliefs such as Business Asset Disposal Relief (formerly Entrepreneurs' Relief).  Speculation was fuelled by the Chancellor's request in July 2020 for the Office of Tax Simplification to undertake a review of CGT and the need to raise funds to respond to the coronavirus (COVID-19) pandemic. There was a notable absence of any significant announcements to CGT, which will give temporary relief to many for now. However, all eyes will be on announcements over the course of the next 6 months and the run up to the Autumn Statement.


For legal support with any of the tax issues raised in the 2021 Budget, please contact Christine Saunders on 0117 314 5633, or complete the form below.

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