Chancellor Rishi Sunak has unveiled a three-part plan for the economy, including protecting jobs and businesses, rebuilding the economy and recouping public finances. Continue reading to discover the Chancellor’s key announcements delivered in the 2021 Budget.
State of the Economy and Public Finances at a glance
The economy shrank by 10% in 2020 but is expected to rebound in 2021 with a projected annual growth of 4%. It is also forecasted to return to pre-covid levels by the middle of 2022, with an increase of 7.3% next year. The UK has borrowed a peacetime record of £355bn this year, which is the highest level of borrowing since WW2 and the total borrowing figure is set to reach £234bn in 2021-22.
To view the Budget and other supporting documents, please visit the government’s website.
Coronavirus Support Measures
The Furlough Scheme extended until September 2021
The furlough scheme that was due to end on the 31st of April 2021 has been extended until September 2021. There will be no change for furloughed employees as the government will continue to pay 80% of employee’s wages for hours they cannot work. Employers will be asked to contribute 10% towards the cost of furloughed employees from July and 20% in August and September.
The Self-Employed Income Support Scheme (SEISS) extended until September 2021
600,000 more self-employed people will be eligible for help as access to government grants is widened. Anyone who completed a tax return for the 2019/20 fiscal year will qualify for the new grant payments, provided a tax return was filed by the 2nd of March 2021.
The SEISS extension will consist of a fourth and fifth grant. The fourth grant covers the three months from the start of February until the end of April. The grant is worth up to 80% of average trading profits up to a total of £7,500.
The fifth grant will cover the period from early May to late July, but the amount available will depend on your income loss. Self-employed individuals whose turnover has fallen by at least 30% can apply for a grant of up to 80% of profits, and workers whose income has fallen by less than that will be able to apply for a grant of up to 30% of trading profits. Claims for the fourth grant can be made from next month and in July for the fifth grant.
Universal uplift to be extended for another six months
The Universal Credit uplift of £20 per week will be extended for another six months. Working tax credit claimants will also benefit from equivalent support. However, this will be available in a one-off £500 payment due to how the system works.
The National Minimum Wage to increase from April
The National Living Wage rates (for those aged 23 and over) and the National Minimum Wage (for those of at least school leaving age) will increase from April 2021.
|23 and over||21 to 22||18 to 20||Under 18||Apprentice|
|April 2021 (new rate)||£8.91||£8.36||£6.56||£4.62||£4.30|
Stamp Duty Land Tax
Under the current scheme, buyers do not have to pay Stamp Duty Land Tax on a property up to the value of £500,000. As part of the measures announced in the Budget 2021 to create a generation of buyers, not renters, the Chancellor announced that the current stamp duty holiday has been extended until the 30th of June 2021. The nil rate band will be set at £250,000 until the end of September 2021 and will return to £125,000 after this point.
A new mortgage scheme to help buyers with a low deposit will also be launched and will facilitate a 5% deposit. Chancellor Rishi confirmed that major banks including NatWest and Santander will be offering these low deposit mortgages from next month (April 2021).
Income Tax Threshold
Income Tax thresholds will be frozen after next year’s increases until 2026. The Personal Allowance will increase to £12,570 and the basic rate limit to £37,700 for 2021 to 2022. The higher rate threshold (the Personal Allowance added to the basic rate limit) will increase to £50,270 for 2021 to 2022.
One of the key announcements in the Budget 2021 is that the Corporation Tax on company profits will rise from 19% to 25% in April 2023. Even with the rise, the UK will still have the lowest Corporation Tax rate in the G7.
The 19% rate will remain in place for about 1.5 million businesses who have profits of less than £50,000. The government also plans to taper the rates above the threshold and predicts around 10% of companies will pay the higher rate.
What will not change?
There will be no changes to Inheritance Tax, the lifetime pension allowance, or VAT.
Business, Digital and Science
Recovery Loan Scheme
Businesses can access a new Recovery Loan Scheme that will replace the Bounce Back Loan scheme and other existing coronavirus loan schemes. Businesses of any size can continue to access finance and loans to boost growth, investment, or for any other legitimate business purpose. The government will guarantee 80% of the lender’s finance to ensure they have to confidence to continue lending.
Incentive grants for Apprenticeships
The incentive grants for apprenticeships will increase to £3,000 and £126m for traineeships.
VAT rate maintained at 5% until September
The VAT rate will remain at 5% for the hospitality sector, and after that, an interim rate of 12.5% will be in place for a further six months. The usual 20% VAT rate will resume in April 2022.
Business rates holiday
Business rates holiday for firms in England will continue until June with a further 75% discount after that.
New grants will be available to get businesses affected by coronavirus back up and running. £5bn worth of grants will be made available for shops and other businesses forced to close. Non-essential outlets due to open in April can access up to £6,000 per premises and up to £18,000 for gyms and other leisure and hospitality businesses.
New Visa Scheme
Visa reforms aim to bring in highly skilled workers and aid rapidly growing firms source talent from overseas – specifically in the science, research and tech areas. The new visa scheme will work on a points basis.
Other Key Announcements:
- £600bn to support the UK’s vaccination rollout
- £400m to help arts venues in England, including museums and galleries, to re-open
- All alcohol duties to be frozen for a second year
- No extra duties on spirits, wines, cider or beer
- Fuel duty to be frozen for the eleventh consecutive year
- £1bn Towns Fund to promote regeneration in 45 English towns
- £150m for community groups to take over pubs at risk of closure
- The first eight sites for freeports in England announced
- New UK infrastructure bank to be set up in Leeds
- £15 bn in Green Bonds, including for retail investors, to help finance the transition to net-zero by 2050
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