Through the strange distortions of the perceived passage of time that seems to be one of the side-effects of the pandemic, March 2020 can seem like yesterday - or an eon ago. For Rishi Sunak, it provided the stage for his first Budget, basking in the metaphorical sunny uplands of a recent election victory and the real sun of a spectacular spring, beating down on the rapidly developing pandemic. Within days of that first Budget, everything had changed, for the financial year ahead and for many more to come; and it rapidly became clear that his next Budget would require a very different approach. Indeed, that approach ran throughout the last year, the announcement of vast spending plans no longer requiring the set-piece stage of anything resembling a Budget. Autumn came and went without there being a formal Budget, the very thought of such a set-piece event thought to be a potential distraction from matters of literal life and death.

In the meantime, the Scottish Budget took place for the second time before its UK counterpart (on 28 January 2021), with Scottish income tax rates and thresholds confirmed for 2021-22 by the Scottish Parliament in the week before the UK Budget. Perhaps fortunately for the Scottish Government's decisions, there was nothing dramatically new on income tax at the UK level for 2021-22; ministers now have time to consider the impact of the decision to freeze the personal allowance and higher rate threshold until 2026 on their own plans for that period.

Of course, it was not only the Scottish Government's decision on income tax that was announced prior to the UK Budget. Many of Mr Sunak's plans, at least on spending, were made known by one means or another in the run-up to 3 March. We knew in principle what was coming on furlough, working tax credits, the extension of the SDLT 'holiday' and much else besides.

Revealing what was in the Budget used to be a resigning offence (when politicians commonly resigned on matters of principle); nowadays these pre-Budget revelations, not resignations) are a regular occurrence, although the extent of prior announcements made this year did attract the ire of the Commons Speaker, following this year's speech. Mr Sunak even appeared at a Zoom event on the day before the Budget, flourishing a (closed) copy of the main Budget document - although perhaps that was a 'stunt' version of the booklet, devoid of its real contents.

Before the Budget, we knew a great deal about intended continued spending. What, perhaps unsurprisingly, was not pre-announced was the extent to which this would be a significant tax-raising Budget, at least in the medium term. Significant rises in business taxes are delayed and balanced by a range of fiscal incentives; for individuals, taxes will rise primarily via the impact of fiscal drag. The freezing of the personal allowance and higher rate threshold will have a significant effect over the long period (until 2025-26), for which figures have been announced. While the manifesto commitments to maintain the same rates of income tax, National Insurance or VAT have (just about) survived, there will be a substantial rise in the overall tax intake over the medium term. Indeed, the proportionate tax burden is set to rise to its highest level since the 1960s, if the full Budget programme as announced takes effect.

Tax rises – or major changes - may not be complete yet. A range of consultations has been scheduled for publication on 23 March; these may include fundamental proposals on capital gains tax and a range of other matters. It seems a safe bet that the dearth of major tax announcements over the past year will not be repeated in the next. On the other hand, there will be a number of other Budgets and a looming election before the full effects of this one come into effect. Plenty of time for things to change again!


As previously trailed in the November 2020 spending review, the Chancellor increased both the personal allowance and the higher rate tax threshold by inflation to £12,570 and £50,270 respectively. All rates and all thresholds have otherwise been frozen, with the personal allowance and the higher rate threshold maintaining the status quo until 5 April 2026. Given that the additional rate band (at £150,000) and the threshold at which personal allowances are tapered (at £100,000) have been frozen since their inception, it seems likely that all thresholds will remain frozen for the next five years.

At the Scottish Budget on 28 January 2021, the Scottish rates (which apply to the earned and property income of Scottish taxpayers) were also frozen, but in a move similar to that in the UK budget, the thresholds were raised in line with inflation. As yet, it is not known if the Scottish thresholds will be frozen until 2026.

The implications of this initially are that in 2021-22, the earnings of a rUK taxpayer are taxed at 20% up to £50,270, while the earnings of a Scottish taxpayer are taxed at 41% from £43,662. Consequently, a rUK taxpayer with earnings of £50,270 will pay £7,540 of income tax, while the Scottish taxpayer will pay £9,090, an additional £1,550 of income tax. The differential grows significantly higher up the income scale.

It will be interesting to see if the Scottish Government chooses to increase its thresholds between now and 2026, as that action would now reduce that differential.

Here is a comparison of the Scottish and rUK rates and thresholds:-

A budget for unprecedented times

And here is a table of comparative tax impacts at different income levels:-

A budget for unprecedented times

Ironically, the freezing of the personal allowance and the higher rate threshold for such a long period will have significant effects on the individual and overall tax burden, especially if the predicted economic recovery includes significant rises in income, caused by the phenomenon known as fiscal drag. More and more taxpayers will be dragged into paying income tax to any extent, or into paying it at the higher rates; and the gap between basic and higher rates is a significant one for every pound affected.

A further point of interest is the potential effect of freezing the higher rate tax threshold on National Insurance in future years. The current upper threshold for higher rates of Class 1 and Class 4 contributions is tied to that income tax higher rate threshold, although this is a relatively recent development. Maintaining that link will, in relative terms, depress the take from NICs – a kind of reverse fiscal drag. (It is that linkage that produces a marginal combined income tax/NIC rate of 53% for Scottish taxpayers on the 'slice' of income between the Scottish and the rUK higher threshold).

There were no changes to National Insurance rates for 2021-22; and negligible, inflation-based rises in some NIC thresholds. The Employment Allowance is frozen, at £4,000 per employer.


Taxation of coronavirus support payments

Grants from the Self-Employment Income Support Scheme (SEISS) made on or after 6 April 2021 will be taxed in the year of receipt. The initial rule confirming the taxability of such payments referred to the year 2020-21, but payments will now extend to at least the next tax year.

Tax treatment of COVID-19 support scheme: working households receiving tax credits

In an effort to ensure that what one part of HMRC giveth, another part does not taketh away, the UK Government is expected to confirm that it will legislate in Finance Bill 2021 to introduce an exemption from income tax for the COVID-19 support scheme: working households receiving tax credits payments. This is a corollary to the extension of the £20 weekly increase in such credits, to include the payment of that increase as a lump sum to cover the period from April to September 2021.

Charge if person is not entitled to a Self-Employment Income Support Scheme (SEISS) payment

The UK Government is updating the Finance Bill 2021 provisions in Finance Act 2020, which specify that an individual is subject to a 100% tax charge if they receive payment to which they are not entitled. It is interesting to see the principle of a '100% tax charge' being extended – it does occur elsewhere in the tax system, for example in the high-income child benefit tax charge.

Income tax exemption for employer-reimbursed COVID-19 tests

The UK Government will legislate in Finance Bill 2021 to introduce a retrospective income tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.The corresponding National Insurance contributions disregard is already in force. These rules are to be extended to 2021-22; and will include exemption from any benefit charge where the test is actually provided by the employer. (Perhaps only HMRC could regard the provision of such a test as a "benefit" which might be thought to attract tax!)

Income tax exemption for COVID-19 related home office expenses

The UK Government will, by secondary legislation, extend the temporary income tax exemption and Class 1 National Insurance contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment. The extended exemption will have effect until 5 April 2022.

Cycle exemption

Understandably over the last year, employer financed bicycles have been used more for designated exercise periods rather than commuting. This would breach one of the conditions for tax exemption on the employer providing the benefit, so there will be a time-limited easement to the exemption, to disapply the condition that states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020. The change will have effect on Royal Assent of Finance Bill 2021 and will be in place until 5 April 2022, after which the normal rules of the exemption will apply.

Payments to victims of modern slavery/human trafficking

The UK Government will legislate in Finance Bill 2021 to introduce an exemption from income tax for financial support payments made by the UK Government and devolved administrations to potential victims of modern slavery and human trafficking. This measure will take effect retrospectively from 1 April 2009 when the financial support payments started.

Fuel benefit charges for cars and vans and van benefit charge

The UK Government will increase the van benefit charge and the car and van fuel benefit charges by the September 2020 Consumer Price Index for tax year 2021-22.


Rules introduced for public authorities in April 2017 in relation to the taxation of those engaged via intermediaries (eg via a personal service company) are being extended to medium and large entities on 6 April 2021. Under the rules, if the circumstances were such that, were the services provided under a contract directly between the client and the worker, the worker would be deemed to be an employee of the client, then it is now the client's responsibility to impose PAYE/ NIC on the payment to the worker.

Minor technical changes have been introduced to correct unintended consequences related to the definition of a company that is an intermediary; and a targeted anti-avoidance rule has also been introduced to prevent exploitation of the definition.

Following feedback from stakeholders, amendments have been introduced to make it easier for parties in the contractual chain to share information and to protect the client, or deemed employer, from liabilities arising from reliance on fraudulent information provided by other parties in the contractual chain.

More information regarding off-payroll working can be found on our dedicated IR35 hub.


In the continued use of a word previously restricted to the US military or the prison population, it was announced that furlough, or more formally the Coronavirus Job Retention Scheme (CJRS), due to end on 30 April, has been extended until 30 September 2021. This will mean that furloughed employees will continue to receive 80% of their salary for hours not worked, capped at £2,500 per month until September 2021.

In April, May and June there will be no employer contributions required beyond National Insurance and pensions contributions. However, from 1 July 2021, employers will be required to contribute 10% towards the costs of unworked hours. This contribution will then rise to 20% for August and September.

Employers do not need to have previously used the CJRS to make a claim. To be eligible, employees must be on an employer's PAYE payroll by midnight on (i) 30 October 2020 for claim periods up to 30 April 2021; or (ii) 2 March 2021 for claim periods starting from 1 May 2021.

The extension will be a welcome announcement for businesses relying on the CJRS to protect jobs while COVID-19 restrictions continue to affect trading. However, the increased employer contributions required from July will need to be factored into financial plans.

The Self-Employment Income Support Scheme grant has also been extended. The fourth grant will cover the period from February to April 2021 and will be worth 80% of trading profits averaged over three months, up to £7,500 in total and paid out in a single instalment. The fourth grant can be claimed from late April.

The fifth grant covers May to September, with the level of grant determined by a turnover test. If turnover has fallen by 30% or more, individuals will still be eligible for the full 80% grant during this period. However, if an individual's turnover has fallen by less than 30%, they will only be eligible for a grant of 30%, capped at £2,850. The fifth grant can be claimed from late July.

Self-employed individuals who have filed a 2019-20 tax return by midnight on 2 March 2021 will be eligible for the fourth and fifth grants, provided they also meet the other eligibility criteria.


While there are some significant increases (at least for some) in the overall business tax picture, that picture is complicated – the rise in the corporation tax rate is deferred for two years and will only affect companies with large profits; and during that deferral period (but only for that period), there are opportunities to take tax benefits from losses and certain investments.

Corporation tax rates

From 1 April 2023, the main rate of corporation tax will increase to 25%. A post-pandemic rise in corporation tax rates had been widely touted, but the rise from 19% to 25% was definitely at the upper end of expectations. The reintroduction of a small profits rate and marginal relief, as well as a temporary extended loss carry back should take the sting out of the tail for most businesses, at least to some extent.

While the UK never quite reached the targeted low rate of 17%, Rishi Sunak made clear that at 25% the UK will still have the lowest rate in G7, but it is a significant hike nonetheless. The new rate will apply to non-ring-fenced profits of companies with profits in excess of £250,000. It will only apply from the financial year beginning 1 April 2023, giving companies some breathing space to nurse their recovery.

A small profits rate of 19% (so no change) will apply for companies with profits less than £50,000, with marginal relief gradually increasing the effective corporation tax rate for companies with profits between £50,000 and £250,000. This will mean that the marginal rate, on profits between these thresholds, will be considerably higher than the full corporation tax rate.

Close investment-holding companies will not benefit from the small companies rate.

The 6% differential between the main rate and the diverted profits tax will be maintained with a corresponding increase of DPT to 31% from 1 April 2023.

Loss carry-back

In recognition of the difficult trading circumstances that businesses have experienced and to help improve cash flow positions, both incorporated and unincorporated businesses will be able to carry back unused trading losses (including ring fence trading losses) for up to three years. The losses available for carry-back are those made in tax years 2020-21 and 2021-22, subject to a £2 million cap for each year, which can be carried back to the earlier two years of the extended period. This compares to the current regime where trading losses can be carried back for just one year. There is no limit to the losses that can be carried back for one year (in line with the current regime).

For companies, the new carry-back rules can be used to generate up to an additional £760k in cash tax repayments; potentially more could be available to non-incorporated businesses.

There will be limits applied for corporate groups, which will require to apportion the £2m limit among its group companies where any of its companies have capacity to carry back more than £200,000 of losses. Detailed provisions on group restrictions are yet to be published.

Claims by companies for extended loss carry-back that fall below £200,000 can be made outside of a tax return, so companies with losses below this level do not need to wait until a return is submitted to access relief.

Companies that expect to fall within the new 25% main corporation tax rate and are not in need of a cash 'shot in the arm' should consider their position carefully. Their choice may be between making a claim to carry back against profits taxed at 19%, versus the potential to carry forward losses against future profits to be taxed at 25%.

Super deduction of 130%

Whereas the return to small companies rates/marginal relief and three-year loss carry-back periods are both blasts from the past, a genuinely novel development was announced - a 'super deduction' of 130%, to stimulate and bring forward infrastructure investment where companies have the available resource. It will be particularly welcomed in the manufacturing and construction industries.

The relief will apply to expenditure by companies from 1 April 2021 until 31 March 2023 (so it won't apply when the main rate increases to 25%) and will provide a 130% first year capital allowance for companies investing in qualifying new plant and machinery asset. It won't apply where a contract to acquire the plant or machinery was entered into prior to 3 March 2021.

When compared to the current 18% writing down allowance or the restricted 100% annual investment allowance on those assets, the 'super deduction' is a significant tax giveaway. A 50% allowance (compared to the current 6% writing down allowance) will be available for integral features (or 'special rate' assets).

Note that the 'super deduction' is targeted at companies (rather than unincorporated businesses) in contrast to the general capital allowances regime and there are exclusions for some assets (e.g. cars, connected party transactions and expenditure on assets for leasing). Unincorporated businesses can claim the full cost of expenditure through the annual investment allowance up to the relevant limit.

Capital allowances – annual investment allowance

In addition to the companies-only 'super deduction', businesses carrying on a qualifying trade and considering substantial capital expenditure will be pleased to know that capital allowances annual investment allowance (AIA) will be kept at £1,000,000 for an additional year: from 1 January 2021 to 31 December 2021. It will return to £200,000 from 1 January 2022 onwards.

Transitional rules will apply to any businesses whose accounting periods straddle 31 December 2021, requiring them to prorate the £1,000,000 and £200,000 AIA allowances for such periods. The transitional rules will also cap expenditure falling on either side of 31 December 2021 - a further prompt for cash rich businesses to invest now, rather than later.

R&D reliefs consultation

In line with the general drive to increase private investment spend, the UK Government also announced a specific aim - to increase R&D expenditure to 2.4% of GDP by 2027. To this end it has published a wide-ranging consultation into both of the UK's R&D tax relief regimes.

The consultation looks not only at the form of reliefs (both deductions and tax credits), but also the impact of each relief in generating additional R&D expenditure, the areas covered by the reliefs, and the administration of relief claims.

The consultation began on 3 March and is open for responses until 2 June 2021.

Other changes

In other more pointy-headed news:

  • tweaks will be made to the hybrid mismatch regime to fully implement the recommendations in OECD BEPS action 2;
  • several technical changes will be made to the corporation tax loss relief rules to simplify administration and deal with various irregularities in their application. Notably, group relief will be extended to carried forward losses – meaning that a company which has fully covered its profits can surrender carried forward losses to other members of its group.

Enterprise Management Incentives (EMI)

In recognition of the continued disruption caused by COVID-19 to working patterns, and the importance of EMI in recruiting, retaining and rewarding employees, the time-limited exception to the committed working time requirement of EMI has been extended by 12 months, to 5 April 2022.

To benefit from EMI, employees must meet the statutory committed working time requirement, both at the time EMI options are granted and throughout the duration of holding EMI options. The time-limited exception ensures that employees do not fail this requirement as a result of being furloughed or reducing their hours for reasons connected to COVID-19. The exception applies to new and existing EMI options and has effect from 19 March 2020 to 5 April 2022.

A call for evidence has now also been issued in relation to a review of the EMI regime, following a welcome announcement in the July 2020 Budget. The aim of the review is to ensure that EMI provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively and, more interestingly, to examine whether more companies should be able to access the regime. Combined with the UK Government's commitment to supporting business growth, this is a positive development in the future of EMI, which has to date been key to many growing businesses.

Finally, the Chancellor's silence in relation to capital gains tax will be a relief to those holding EMI options, who can – for now at least - continue to benefit from (lower) capital gains tax rates on the sale of their option shares while, in most cases, avoiding any charge to income tax.

Interest and royalties

From 1 June 2021, any payments of interest and royalties made by a UK resident company to a connected EU resident company may be subject to UK withholding tax. This is a result of the decision to repeal provisions in UK legislation relating to the EU Interest and Royalties Directive (IRD), which is possible now that the Brexit transition period has come to an end.

As is already the case for payments of interest and royalties made by EU resident companies to UK resident companies, the provisions of the relevant double tax treaty will apply to determine whether any tax should be withheld. Some double tax treaties already exempt such payments from withholding tax, although for some countries such as Italy and Portugal, the withholding tax position will need to be considered.

While the Chancellor made only one reference to Brexit in his Budget statement, there are numerous examples of policy changes in the Budget report with a direct tie to the UK Government's newfound legislative freedom, including the decision to repeal references to the IRD in UK legislation.

Environmental measures

While the main environmental measure in the Budget speech was the commitment to establish a National Investment Bank – a number of other new measures and tweaks were introduced unspoken. These include:

  • The Green Gilt – this is a government bond of which at least £15 million will be issued in the 2021/22 financial year. In June, the UK Government will publish "The green gilt framework" detailing how funds raised from the issue will be deployed.
  • Green retail National Savings and Investment (NS&I) product – this will be launched in the summer and will be closely linked to the Green Gilt.
  • Carbon markets working group –a new group aimed at making the UK a leading market for voluntary carbon offset markets (voluntary carbon offsets are those which cannot be used to meet obligations under a regulated scheme such as Kyoto, or the UK / EU Emissions Trading Schemes).
  • Plastic Packaging Tax – a new tax that will apply to importers and manufacturers of plastic packaging containing less than 30% recycled plastic. The rate of tax will be £200 per tonne of plastic manufactured or imported, with a de minimis exemption for those manufacturing or importing less than 10 tonnes annually. The tax will apply from 1 April 2022.
  • Repeal of some carbon emissions tax legislation / UKETS – following consultations last year, and the announcement in December 2020 of a free-standing UK emissions trading scheme (UKETS) – legislation to establish a carbon emissions tax will be repealed. Instead, the UK will operate a 'cap and trade' model from 1 January 2021. The UK Government will publish further reports on expanding the reach of the UKETS over 2021.
  • Climate Change Levy and Carbon Price Support – the rates of the Climate Change Levy applicable to oil and gas will decrease from 17% in 2021, to 14% in 2022 and 12% from April 2023. The Carbon Price Support rate is set at £18 per tonne.


A reduction in the VAT rate to 5% was introduced from 15 July 2020 to provide pandemic-related support for hospitality, accommodation and attractions. This 5% rate has been extended for a further six months until 30 September 2021. The rate will increase to 12.5% from 1 October 2021, returning to the standard rate of VAT (currently 20%) from April 2022. The hospitality sector will also appreciate the decision to freeze alcohol duty for another year, until 2021-22.

Also in response to COVID-19, the UK Government introduced the ability to defer VAT payments for the period 20 March 2020 - 30 June 2020 until 31 March 2021. In the Budget the 'VAT deferral new payment scheme' was announced which is open now until, and including, 21 June 2021. This scheme allows payment of deferred VAT to be made in equal instalments, interest free. It is up to the taxpayer to choose the number of instalments. A maximum of 11 instalments is possible if taxpayers choose to join the scheme in March 2021. If taxpayers do not join until the deadline in June, the maximum number of instalments will be limited to eight. The instalments are payable by direct debit.

Taxpayers, not their agents, must join the scheme; and all outstanding VAT returns from the last four years must be submitted and errors corrected for taxpayers to be eligible. Taxpayers must have details on how much VAT was deferred originally and how much, if any, has been paid; they must also be able to pay the first instalment when they join.

For those taxpayers on the VAT annual accounting scheme or VAT payment on account scheme, HMRC will invite them to join the new payment scheme later this month. Alternative payment methods are available for those who cannot pay by direct debit.

The VAT registration threshold is maintained at a turnover of £85,000 up to and including 2023-24 – yet another freeze in a threshold.

Changes to VAT and the income tax self-assessment penalty regime will take effect from 1 April 2022. The late payment regime will be points based with penalties only to be issued once a threshold is reached; penalties will be proportionate to the amount of tax owed and how late the VAT payment is. For taxpayers in ITSA with business or property income exceeding £10,000, the changes will take effect from 6 April 2023, and for all other taxpayers in ITSA, 6 April 2024.


Among the most pervasive rumours of what might happen in this year's Budget was that capital gains tax rates would rise, perhaps simply to align with the top rate of income tax paid by affected taxpayers. No sign of that – at least not yet. There was confirmation that the annual exempt amount would be frozen at its 2020-21 level for 2021-22 (£12,300; and £6,150 for most trusts); but rates remain as they are now.

Given two reports on the tax by the Office of Tax Simplification, one can anticipate that it will be the subject of consultation, details of which will be issued on 23 March. Having (just about) confirmed adherence to the manifesto pledge not to raise rates of income tax, National Insurance or VAT in the Parliament, the Chancellor notably refrained from giving any such assurance on CGT rates when questioned by a member of the media. Watch this space!

There will be a technical change to an anti-avoidance rule affecting holdover relief for gifts. The effect is to ensure that hold-over relief is not available where a non-UK resident person disposes of an asset to a foreign-controlled company controlled either by themselves or another non-UK resident with whom they are connected.


Nothing to see here! Literally – the announcement is of no change, not just for next year but for all years up to and including 2025-26. The main nil rate band is frozen at £325,000 - as it has been since 2009. Even with current rates of inflation, this very long example of fiscal drag is beginning to bite. The more recently introduced residence nil-rate band also sticks at £175,000 (and the threshold at which this is reduced is also frozen at £2 million), which still enables the UK Government to note that highly organised married or civil-partnered couples can pass on assets of up to £1 million to descendants on the second death.

It is noted that only about 6% of estates have an IHT liability. But a significantly higher number are potentially affected, as it is a tax in which planning is particularly prevalent and valuable. More estates will be brought into the process by this non-change; and with considerable understatement the UK Government notes that "customer [sic] experience could be negatively impacted for those being brought into IHT if they are not already familiar with the process". Well, yes, it could.

Perhaps looking so far ahead on basic IHT provisions means that the prospect of wholesale reform of the tax (or its replacement by a wealth tax) fades somewhat. But there are outstanding proposals on this tax from the Office of Tax Simplification (for example on agricultural and business property relief), some of which interact with capital gains tax; and this may be the subject of further consultation.

Tucked away at the nerdy end of the Budget documentation is the forecast that overall IHT receipts will rise considerably in 2021-22; and then fall in 2022-23, before growing slightly in subsequent years. There seems no particular reason for this pattern in the (non)-change announced in relation to the nil rate band, apart from perhaps, speculation on the value of affected estates.


As with income tax thresholds, although without the same medium-term timescale, the main pension allowance figures are frozen for a year. Thus, the lifetime allowance remains at £1,073,100 for 2021-22; the annual allowance limit is £40,000; and the tapered annual allowance (which applies when an individual has ‘adjusted income’ over this amount, provided the ‘threshold income’ test is met) remains at £240,000.

There will be legislation to ensure that collective money purchase pension schemes (also known as collective defined contribution schemes), to be introduced by the Pension Schemes Act 2021, can operate as registered pension schemes for tax purposes.

The individual savings account (ISA) annual subscription limit is frozen at £20,000 for 2021-22; and the annual subscription limit for junior ISAs for 2021-22 will remain unchanged at £9,000, as will the annual subscription limit for child trust funds.

In more general terms, the dividend allowance has been frozen at £2,000 for 2021-22, while the personal savings allowance has also been frozen at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.


Extension to SDLT holiday

The temporary increase in the SDLT nil rate band to £500,000, which was due to end on 31 March 2021, has been extended to 30 June 2021 – a measure that will be widely welcomed by many purchasers at risk of failing to complete purchases by the end of March due to the volume of current transactions. From 1 July 2021 to 30 September 2021 the nil rate band will fall to £250,000, twice its normal level, before reverting to £125,000 from 1 October 2021.

The UK Government has taken a different approach here from the Scottish Government; the Scottish Budget on 28 January 2021 confirmed that the temporary increase in the land and buildings transaction tax (LBTT) nil rate band to £250,000 would not be extended and would end on 31 March 2021 as originally planned. This followed record LBTT receipts of £82.2m in December 2020, which no doubt influenced the decision, though the extension of the SDLT holiday might well bring pressure on the Scottish Government to reconsider.

SDLT relief for land in Freeports

A new relief from SDLT has been introduced for purchases of land in a Freeport tax site. The land has to be acquired for use in a ‘qualifying manner’ during a three-year control period (or until disposal of the land), and HMRC will check that the conditions continue to apply throughout the control period. The relief will be available for purchases made from the time the Freeport tax site has been formally designated until 30 September 2026. It is expected that a similar relief from LBTT will be introduced when Freeports or Greenports are established in Scotland.

SDLT 2% surcharge for residential property purchased by non-residents

As announced at Budget 2020, a 2% SDLT surcharge on residential property purchased by non-residents or by close companies controlled by non-residents will apply for transactions that complete or substantially perform on or after 1 April 2021. Guidance about the new rules will be published on GOV.UK on Monday 8 March 2021. There is no equivalent surcharge for non-residents buying residential property in Scotland, although of course the level of additional dwelling supplement at 4%, regardless of the residence of the purchaser, might be thought to obviate the need for a further charge.

Annual Tax on Enveloped Dwellings (ATED)

The new rates of ATED that apply from 1 April 2021 are:

A budget for unprecedented times

New reliefs from ATED and from the 15% rate of SDLT have been introduced for housing co-operatives. These apply from 1 April 2020 for ATED and from 3 March 2021 for SDLT.


Landfill Tax

The standard and lower rates of Landfill Tax will increase in line with RPI, rounded to the nearest 5 pence. The change will have effect from 1 April 2021.

Aggregates levy

The aggregates levy rate in 2021-22 will be frozen, but the UK Government intends to return the levy to index-linking in the future.

Air passenger duty

APD rates will increase in line with RPI from April 2022, meaning that the reduced and standard short-haul rates will remain frozen at the same level since 2012. Long-haul rates will increase in line with RPI.

The rates for long-haul economy flights from Great Britain will increase by £2, and the rates for those travelling in premium economy, business and first class will increase by £5. Those travelling long-haul by private jets will see the rate increase by £13.

Fuel duty

Drivers will be relieved to know that fuel duty is frozen again for 2021-22.

Vehicle excise duty rates for cars, vans and motorcycles

The vehicle excise duty rates for cars, vans, motorcycles and motorcycle trade licences will increase by RPI with effect from 1 April 2021.

Climate change levy

The climate change levy main rates for 2022-23 and 2023-24 will increase, to continue to re-balance the electricity to gas ratio.

The reduced rates (discount percentages) will be adjusted, so that businesses in the Climate Change Agreement scheme will only be subject to an increase to their climate change levy liability in line with RPI for the years 2022-23 and 2023-24.

Alcohol duty

All alcohol duty rates will be frozen, whether because of the rise of home consumption during the 'stay at home' periodor otherwise. In a refreshing announcement, it was stated that there will be no revisions to existing legislation and no new legal provisions will be introduced. 


Tax avoidance

In 2020, the UK Government consulted on 'tackling promoters of tax avoidance', by proposing stronger sanctions against promoters and enablers. This consultation has resulted in provisions in Finance Bill 2021 that aim to enhance anti-avoidance measures and strengthen HMRC's information gathering powers to tackle abuse. The anti-avoidance regimes to be amended in this acronymic soup include: Disclosure of Tax Avoidance Scheme (DOTAS), Disclosure of VAT and other Indirect Taxes (DASVOIT), Promoters of Tax Avoidance Schemes (POTAS) and the General Anti-Abuse Rule (GAAR).

In addition to the provisions aimed at enhancing anti-avoidance regimes, Finance Bill 2021 will legislate on a number of tax administration issues, including:

  • 20% reduction in penalties for those receiving Follower Notices;
  • Introduction of a new power enabling the UK Government to make regulations implementing OECD rules on information sharing by digital platforms. This will be followed by a consultation in summer 2021;
  • Updated powers to amend bank surcharge, bank loss restriction and bank levy rules by regulations;
  • A new 'Financial Institution Notice' which can be used by HMRC to require financial institutions to provide information to HMRC about a specific taxpayer, without the need for approval from a tax tribunal;
  • A revised penalty regime for VAT and income tax self-assessment to be introduced between 2022 to 2024;
  • New powers to tackle electronic sales suppression – this goes to the core of the perceived problem, by creating offences in the possession, manufacture, distribution and promotion of electronic sales suppression software and hardware, as well as creating information powers.

    To further strengthen anti-avoidance in the UK, and pursuant to its obligations under the EU-UK Trade and Cooperation Agreement, the UK Government also intends to consult on the implementation of OECD Mandatory Disclosure Rules (MDR) later in 2021. The OECD's MDR seek to combat offshore tax evasion through the global exchange of information.

    Tackling fraud: A new Taxpayer Protection Taskforce

    HMRC has recently been investigating incorrect and fraudulent CJRS and SEISS claims, and the Chancellor announced an additional £100m funding for that effort. The Chancellor opened his Budget statement by setting out the UK Government's three-part plan to tackle the economic fall-out of the pandemic:

    (1) to do whatever it takes to support people and business,

    (2) to fix public finances once the worst of the pandemic is behind us, and

    (3) to work towards building a stronger future economy.

    Both the second and third parts are predicated on the support being properly claimed and applied in the first. To that end, the Chancellor announced the Taxpayer Protection Taskforce; a team of 1,265 HMRC staff who will be tasked with combatting fraud within COVID-19 support packages, such as CJRS and SEISS.


    The Chancellor seemed quite excited by his final announcement: the introduction of freeports following the UKs departure from the EU. Eight locations were announced in England with discussions ongoing with the devolved nations.

    In England freeports will begin operating at the end of this year, and will benefit from an enhanced 10% rate of structures and building allowances for the construction and renovation of non-residential property brought into use on or before 30 September 2026; also until 30 September 2026, 100% capital allowances will be available for companies investing in plant and machinery on the designated sites for main and special rate assets; and full relief from SDLT will be available until 30 September 2026 for purchases of property for a qualifying commercial use within the designated area.

    Full relief from business rates will be available until 30 September 2026 to new businesses and expansion of certain existing business. This relief will apply for five years, starting from when a beneficiary first receives the relief. Finally, there is an intention to make an NIC relief available for eligible employees from April 2022 (or later when the site is designated) until April 2026, and an intention to further extend it until April 2031.

    The Scottish Government plans for Greenports, adapting the UK Government's proposals, have yet to be revealed in detail, but will require operators and businesses benefitting to adhere to pay the real Living Wage, adopt the Scottish Business Pledge (now closed), commit to sustainable and inclusive growth in the local community, and contribute to Scotland's transition to net zero carbon. The Scottish Trade Minister's statement noted the potential for a relief from land and buildings transaction tax and non-domestic rates.


    Ayrshire, Argyll and Bute, and Falkirk (along with three Welsh cities) will all benefit from Growth Deals. There is an emphasis on regeneration, infrastructure and aerospace technology for Ayrshire; on tourism, housing and the digital economy for Argyll and Bute; and Falkirk will see support for travel, tourism and energy among other things.


    Isobel d'Inverno

    Director of Corporate Tax

    Neil Ritchie

    Director of Personal Tax

    Leigh Gould


    Alan Barr