March 11, 2021 | By Connor Mullins
Rishi Sunak delivered his second Budget as Chancellor, and arguably one of the most important in recent times, to the Commons earlier last week.
Prior to the announcement, it was revealed that the Furlough scheme would be extended until September, with the business world awaiting confirmation of the employer contribution and how it would work.
It was also expected that other measures, such as the VAT cut for hospitality and tourism, as well as business rates relief, would also be extended in line with the easing of restrictions.
Economy and OBR forecasting
Sunak said that the government’s response to coronavirus is working and that the Office of Budget Responsibility is now forecasting a “swifter and more sustained recovery than expected”. The economy will return to pre-Covid level by the middle of next year, however, he added that Covid-19 has done damage.
“The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.”
Three part plan to protect jobs
Sunak began by outlining his three part plan ‘to protect the jobs and livelihoods of the British people’
- Continue doing whatever it takes to support British people and businesses
- Fix public finances
- Begin the work of building the future economy
Sunak then addressed the three-part plan in full:
Stage 1 – Support British people and businesses
- The furlough scheme will be extended until the end of September
For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked, with businesses to contribute 10% and 20% in August and September.”
- Support for the self-employed will also continue until September
A fourth grant will cover the period February to April, and a fifth and final grant from May onwards. The fourth grant will provide three months of support at 80% of average trading profits.
For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July.
It will, however, be targeted towards those most affected by the pandemic, so people whose turnover has fallen by 30% or more will continue to receive the full 80% grant.
People whose turnover has fallen by less than 30% will therefore have less need of taxpayer support and will receive a 30% grant.
A major improvement in access to the self-employed scheme was also announced in response to the newly self-employed being unable to qualify originally because they hadn’t all filed the 2019-20 tax return.
Sunak announced that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom became self-employed last year can now claim the fourth and fifth grants.
- Extending support for the lowest paid and most vulnerable
The Universal Credit uplift of £20 a week will continue for a further six months, while Working Tax Credit claimants will be provided with equivalent support for the next six months.
Sunak also reaffirmed the Government’s commitment to end low pay, increasing the National Living Wage to £8.91 from April – an annual pay rise of almost £350 for someone working full time on the National Living Wage.
Business support schemes, grants, loans and trainees
A new Restart Grant was announced, worth up to £6,000 per premises in April and up to £18,000 for firms that open up later in the year.
The grant is aimed at helping businesses ‘reopen and get going again.’ The Chancellor said non-essential retail will open first, so they will receive grants of up to £6,000 per premises. Hospitality and leisure businesses, including personal care and gyms, will open later or be more impacted by restrictions when they do, and will therefore receive grants of up to £18,000.
As the Bounce Back Loans and CBILS program also come to an end, a new Recovery Loan Scheme will take their place. Businesses of any size can apply for loans from £25,000 to £10m through to the end of this year. The Government will provide an 80% guarantee to lenders.
“As well as supporting people’s jobs, incomes, the lowest paid and most vulnerable – this Budget also protects businesses.”
The Government will also double the incentive payments for businesses to £3,000 to all new apprentice hires of any age, investing £126m to triple new traineeships.
£6 billion tax cut for business
The 100% business rates holiday will continue through to the end of June.
For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.
The 5% reduced rate of VAT will be extended for six months to September 30th. An interim rate of 12.5% for 6 months will then follow, meaning the standard VAT rate for the sector will not return until April next year.
Stage 2 – Fix the public finances
Tax updates
Sunak announced a series of tax updates, adding that the approach to fixing the public finances will be to ask “more of those people and businesses who can afford to contribute and protect those who cannot.”
The basic rate personal allowance will rise as planned to £12,570 from the new tax year in April 2021 and will remain at this level until April 2026. The income tax higher rate threshold will rise to £50,270 from April 2021 and again this will be frozen until April 2026.
Further announcements:
- Income Tax 40p threshold frozen at £50,000 for three years
- Corporation Tax to rise from 19% to 25% in April 2023 for firms with profits over £250k. Taper for firms with smaller profits, down to the 19% rate for 1.4million businesses with profits under £50k
- Inheritance tax threshold frozen at £1m for married couples until March 2026 after years of breaks under the Tories
- VAT registration threshold of £85,000 frozen for 2 years from April 2022
- Annual exempt amount in Capital Gains Tax frozen until April 2026
Stamp duty
The stamp duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June and after that there will be no duty on homes worth up to £250,000 for another three months. The threshold will revert from October.
Pensions
Pensions lifetime allowance to be frozen at just over £1m until April 2026 in a big cut to wealthier pensioners, worth £300m a year by 2025/26.
Mortgage scheme to guarantee 5% deposits
Under a new mortgage scheme, the Government will guarantee lenders who offer mortgages to people with a deposit of 5% on homes worth up to £600,000.
All buyers under who use the scheme will be able to fix their mortgage rate for at least five years if they choose.
This will be available across the UK from April 2021 until December 31, 2022.
Additional tax refunds for businesses
Businesses will also be able to offset their losses against their tax bills going back up to three years, allowing them to claim additional refunds of up to £700,000.
Super-deduction
From April 1, 2021 until March 31, 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
- A 130% super-deduction capital allowance on qualifying plant and machinery investments
- A 50% first-year allowance for qualifying special rate assets
- The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive
No duty increases for alcohol or fuel
Mr Sunak said he will now turn to duties. The planned increases in duties for spirits like scotch whiskey, wine, cider and beer will all be cancelled.
Stage 3 – Begin the work of building the future economy
Investment in green industries
The first ever UK infrastructure bank’, which will invest in public and private projects to finance the green industrial revolution.
‘Help to Grow’ schemes for small businesses
Management schemes will help small and medium sized businesses to get first class management training. Digital schemes will help businesses develop digital skills by giving free training and a 50 per cent discount on new software.
Both programmes will commence by the autumn
New towns deals and community funding
The Treasury will establish a new economic campus in Darlington. There will also be more than £1 billion for 45 new towns deals.
We’re creating a £150 million fund to help communities across the UK take ownership of pubs, theatres, shops, or local sports clubs at risk of loss – putting more power in the hands of local people, Mr Sunak announced.
Today’s announcement was probably one of the most comprehensive Budgets that have been delivered in recent times.
Sunak finished off his speech by announcing a policy to bring investment, trade and jobs right across this country through regional opportunities and via eight freeport locations to unlock billions of pounds of private sector investment, generating trade and jobs up and down the country.
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