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Scott Brown ● Mar 3, 2021
UK Budget 2021: Government reveals three-part plan
Chancellor Rishi Sunak has presented his second Budget after a year of lockdowns, business closures and government spending estimated to be over £400 billion by the end of the financial year. Read on to find out what was covered in the speech.
Scott Brown ● Mar 3, 2021
With pressure to get the economy started again and to repay debt, there has been a lot of speculation as to whether taxes will be increased. The government has pledged to “protect jobs and livelihoods".
The chancellor put forward a three-part plan to:
The chancellor put forward a three-part plan to:
- Support people and business
- Fix finances
- Build the future economy
The economy and fiscal forecasts
- The economy has shrunk by 10% and is not expected to return to its pre-Covid level until the middle of 2022.
- It is estimated that in five years’ time the economy will still be 3% smaller than it would have been without Covid.
- OBR – Growth forecast: 4% 2021, 7.3% 2022, 1.7% 2023, 1.6% 2024, 1.7% 2025
- Borrowing in 2022 forecast to be £234 billion and then increase by 4.4% in 2023, 3.5% in 2024, 2.9% in 2025 and 2.8% in 2026.
Support people and business
- Extension of the furlough scheme until 30 September 2021. Furloughed employees will continue to receive 80% of current salary, capped at £2,500 a month. Employers will be asked for a contribution of 10% from July and 20% in August and September.
- Self-Employed Income Support Scheme (SEISS) will provide a fourth grant covering February – April 2021 valued at 80% of three months' average trading profits (capped at £7,500). A fifth and final grant covering May – September 2021 will also be available ranging between 30%-80%, which will depend on the increase or decrease of the taxpayer’s average profits. Access to the grants will also be widened, making 600,000 more self-employed people eligible for government help, so long as their 2019/20 self-assessment has been filed.
- Restart grants will be available in April to help businesses that were hardest hit by the lockdown reopen. Non-Essential retailers, which are due to reopen in April, will receive up to £6,000 per premises, while businesses in the hospitality and leisure sectors, which will be closed until June, can apply for a grant of up to £18,000 per premises.
- There will be an extra £700 million of additional support to boost the culture and sporting sectors.
- The 100% business rates holiday will continue to end of June and then be discounted by up to two thirds for the remainder of the tax year.
- The £20 weekly Universal Credit uplift introduced last year will be extended for a further six months.
- The Stamp Duty holiday on properties worth up to £500,000 will be extended to 30 June 2021, then be reduced to £250,000 until 30 September 2021 before reducing to the original amount of £125,000 on 1 October 2021.
- First time buyers will be able to get a mortgage with a 5% deposit.
- A new Recovery Loan Scheme will be set up to get businesses operating again. Businesses can apply for loans from £25,000 to £10 million that will be 80% guaranteed by the government.
- The VAT rate for hospitality will remain at 5% until 30 September 2021, increase to 12.5% until 31 March 2022 and revert to 20% on 1 April 2022.
- Incentives for hiring apprentices will increase to £3,000 per hire.
Fix finances – taxes and duties
- Corporation Tax to increase to 25% for companies with profits over £250,000 in April 2023. There will be a small business rate of 19% where profits are less than £50,000 and a tapering regime for businesses with a profit greater than £50,000 up to a profit of £250,000.
- Companies will be able to carry back losses of up to £2 million for up to three years.
- There will be no rises in income tax, National Insurance or VAT.
- The basic rate income tax threshold will increase to £12,570 and higher rate threshold to £50,270. These will be frozen until 2026.
- National Living Wage to increase to £8.91 from 1 April 2021.
- Planned increase in spirits, beer, wine and cider duty cancelled.
- Fuel duty to be frozen
Build the future economy – investment and environment
- A “super deduction” will be available for the next two years for business investment. A deduction of 130% will be allowable against corporation tax.
- Introduction of green savings bonds giving investors the opportunity to buy into projects dedicated to accelerating the UK’s push to become a net-zero economy.
- New Help to Grow programme to help small and medium sized businesses with executive development (management) and free online advice and reduced software costs (digital).