Spring 21 Budget Announcement – What does this mean for Commercial Finance, Businesses and the Property Market?
On the 3rd of March 2021, Rishi Sunak announced his Spring Budget and how the budget will help the country recover from the impact of the Coronavirus.
One announcement is that firms will be able “deduct” investment costs from tax bills, reducing taxable profits by 130% (plant and machinery).
What does this mean for commercial finance?
It means that any machinery or plant that is purchased via a finance product will be more tax efficient through hire purchase than lease finance. This is because hire purchase appears on your balance sheet whereas lease payments do not.
Another statement was that corporation tax on company profits above £250,000 to rise from 19% to 25% in April 2023.
What does this mean for businesses?
In simple terms if your company earns more than £250,000 profit it will be subject to 25% corporation tax as of 2023. However, if your business earns less than £50,000 it will only be subject to the current 19% corporation tax
Lastly, one of the biggest statements from a housing perspective is that stamp duty holiday on house purchases in England and Northern Ireland will be extended to 30th of June 2021 and no tax charge on sales of less than £500,000.
What does this mean for the property market?
With the huge transaction backlog that occurred due to the volume of transactions and businesses having to adapt to a new way of life, it created a vacuum in the market where the average time to complete a sale increased drastically.
The government have extended the deadline to help the backlog of transactions flush through, halting any potential sales falling through due to the buyer being unable to afford their stamp duty charge.
Also, the government have bought in 95% mortgages for first time buyers which should help stimulate the first time buyer market, moving generation rent into generation buy.
The scheme means first time buyers will only need a 5% deposit. The Chancellor says major lenders will be offering this scheme from April, the scheme will be available on new and existing properties priced up to £600,000.
The Spring Budget looks very positive with actions to encourage spending and buying to help our economy grow with plenty in place to help support businesses back up and running.
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