In his opening remarks for the Budget 2021, the Chancellor reflected on the turbulent year for the economy and vowed he would continue to do “whatever it takes” to get the country through the challenges of the pandemic. He stated there has been acute damage to the economy in the last year, with more than 700,000 people losing their jobs, the economy shrinking by 10% – the largest fall in 300 years – and borrowing standing at the highest it has been since World War II.
In his 2021 budget speech, while acknowledging that it will take the UK a long time to recover from the extraordinary economic situation, Mr Sunak set out a three-part plan to “protect jobs and livelihoods of the British people”, warning that corrective action would be needed to tackle the UK’s rising debt.
Furlough extended – Having protected more than 11 million jobs since being put in place last March, the Coronavirus Job Retention Scheme (CJRS) was due to close at the end of April this year. However, the Chancellor revealed in the Budget 2021 that the scheme has now been extended to the end of September.
Employees will continue to receive 80% of their wages up to a £2,500 limit until September. Employers will be expected to pay 10% towards the hours their staff do not work in July, increasing to 20% in August and September as the economy reopens.
SEISS grants – A fourth grant from the Self-Employment Income Support Scheme (SEISS) will be available to claim from April, worth 80% of three months’ average trading profits up to £7,500, and a fifth grant will be open to claims from later in July, covering the May-July period and the level of grant will be based on a taper based on a reduction in turnover test.
Around 600,000 of the newly self-employed will now also be eligible for state financial help. When the SEISS was first launched it was based on tax returns for 2018-2019 – the most recent year at the time for which data was available – but this meant many people failed to qualify. The Chancellor has revealed that the scheme’s cash grants will now be available to those who became self-employed during 2019-20.
Restart Grants – As business grants come to an end in March, the chancellor revealed it will provide a new one-off Restart Grant in April. Non-essential retail businesses will receive grants of up to £6,000. As hospitality and leisure businesses will be opening later in the government roadmap, they will be eligible for grants of up to £18,000.
Recovery Loans Scheme – Through to the end of this year, the new Recovery Loans Scheme allows businesses of any size to apply for loans from £25,000 up to £10m, with the government providing lenders with an 80% guarantee.
Apprenticeship payments – The government announced it will double apprenticeship payments to £3,000 for all new hires of any age. A new, flexible programme will also allow apprentices to work for a number of different employers within the same sector.
Business rates holiday extended – The 100% business rates holiday will continue to the end of June. Rates will be cut by two thirds for the remaining nine months of the year, up to a value of £2m per business.
5% reduced rate of VAT extended – The 5% reduced rate will be extended to 30th September for hardest-hit sectors like hospitality and tourism. It will then move to an interim rate of 12.5% for another six months to the 31st March 2022.
Stamp duty cut extended – It was announced in the Budget 2021 that the £500,000 nil rate band for stamp duty land tax (SDLT) has been extended to 30th June. It will then stand at £250,000 until the end of September 2021, when it will return to the standard level £125,000.
Mortgage guarantee scheme – The new mortgage guarantee scheme will enable homebuyers to secure a mortgage of up to £600,000 with a 5% deposit
Universal Credit – The Universal Credit uplift of £20 a week will continue for a further six months. The Chancellor stated that the government will also provide equivalent support for people on working tax credits “with a one-off payment of £500.”
National Living Wage – The National Living Wage will be increased to £8.91 from April.
The damage of COVID-19 on public finances has been severe. Over 700,000 people have lost jobs, the economy has shrunk by 10% and borrowing stands is at its highest since wartime at £355bn. In the second part of the Chancellor’s three-step plan, he set out how he would put get public finances back on track.
Personal tax thresholds frozen – Firstly, the income tax personal allowance will rise in the next financial year as planned to £12,570, but will then be frozen at that level until April 2026. Similarly, the higher rate threshold will rise to £50,270 and will remain at that level to the same period. The Inheritance Tax threshold, the pensions lifetime allowance and the annual exempt amount in capital gains tax will also be maintained at their current levels until April 2026. In addition, the VAT registration threshold will be frozen for two years from April 2022.
Corporation Tax increase – From 2023, the rate of Corporation Tax paid on company profits will increase from 19% to 25%. Businesses with profits of £50,000 or less will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Vaccination roll out – An extra £1.65bn has been pledged to help vaccinate every adult by the end of July, which should help people can get back to work and the economy to start to recover.
Fuel duty and alcohol duties – Fuel duty will be frozen for the 11th consecutive year. Alcohol duties will be frozen for the second year running.
Help to Grow: Management – Business schools across the UK are to offer MBA style management training for SMEs. Businesses will need to pay £750, the equivalent of 10% of the unit cost, for the 50 hours of tuition, mentoring and peer learning being offered.
Help to Grow: Digital – Aimed at helping SMEs develop digital skills by providing free advice and a 50% contribution towards the purchase of new productivity enhancing software, up to £5,000 each. Businesses can register for both schemes here: https://gov.uk/helptogrow
130% super deduction – Beginning April 2021, a new super deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment or machinery. This means they can reduce their taxable profits by 130% of the cost.
New Freeports – The eight regions selected to be freeports are East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside. The chancellor said the freeports will have “simpler planning”, “cheaper customs – with favourable tariffs, VAT or duties”, and lower taxes – with “tax breaks to encourage construction, private investment and job creation.
Future Fund: Breakthrough – The £375 million UK-wide ‘Future Fund: Breakthrough’ will invest in highly innovative companies such as those working in life sciences, quantum computing, or clean tech, that are aiming to raise at least £20 million of funding.