Budget 2021: Summary Highlights
Rishi Sunak delivered his second Budget speech to the House of Commons on Wednesday. Coming almost exactly a year after the first Covid-19 lockdowns and at a time when businesses are looking forward to reopening, it had the potential to be the biggest fiscal announcement since the Second World War. The Chancellor had to strike a difficult balance between consolidating and extending existing support as necessary, encouraging investment and productivity while trying to claw back unsustainable debt which has spiralled as a result of the general downturn and the financial support measures put in place by the government.
The theme which emerged was that the government wanted to ‘protect livelihoods’ and encourage growth as part of its roadmap out of the recession. It achieved this by extending covid support schemes, delaying major tax rises and signposting where changes would take effect.
Key announcements included support for Arts and Culture, Sport and Health as well as a freeze in Alcohol and Furl duties. Whilst personal allowances will not be increased from April 2022 the Chancellor did manage to keep the Conservative Party manifesto pledge not to increase Income Tax, National insurance or VAT.
Some of the other measures announced were as follows:
Covid Support Schemes
- The current Job Retention Scheme will be extended to 30th September 2021. Employers will be able to claim up to 80% of the wages of employees who have been furloughed to a maximum of £2,500 per month each. From July 2021, employers will be asked to contribute 10% of the cost of hours worked. This will increase to 20% in July and August.
- Those who are Self Employed will be eligible to claim a SEISS (Self-Employment Income Support Scheme) grant. This will be up to 80% of the average of three months earnings and will be capped at £7,500. Those who missed out on the original SEISS grants will be able to apply if they filed their 2019/20 tax returns by midnight of 2nd March 2021.
- The £20 weekly uplift in Universal Credit is to be extended for another six months
- Those claiming Working Tax Credit instead of Universal Credit will get a £500 one-off payment
- The national minimum wage is increased to £8.91 from April
Help for Business
- The government will create a £520m Help to Grow scheme which will provide grants to help SME’s get training, technical advice, and discounts on software to improve their productivity
- Cash grants will be awarded to businesses that are reopening. Initial grants of up to £6,000 will be given to non-essential retailers who are reopening their doors. This will be followed by grants of up to £18,000 for those in the hospitality sector.
- The ‘rates holiday’ will continue until the end of June 2021. Thereafter qualifying businesses will only pay 2/3 of their rates bills.
- A ‘recovery loan scheme’ similar to the current CBILS loan scheme will enable businesses to borrow between £25,000 and £10m backed by an 80% government guarantee.
- The 5% reduced rate of VAT which has been applied to the hospitality and tourism sectors will be extended to 30th September 2021. The rate will then be 12.5% until 31st March 2022 before reverting to 20%.
- A £150m fund will be created to help local communities take over local pubs forced out of business as a result of the pandemic.
Help for the property sector
- In order to help first-time buyers, the government will provide a 95% mortgage guarantee scheme. Recipients will only need a 5% deposit. This will apply to homes worth up to £600,000.
- The Stamp Duty Land Tax reduction will be extended. Until 30th June 2021, no SDLT will be payable on the first £500,000 of the cost of a property. This will be reduced to £250,000 until 30 September and revert to £125,000 thereafter.
Corporation Tax
From April 2023 companies with profits over £250,000 will be charged corporation tax at 25%. Those with profits below £50,000 will continue to be charged the current rate of 19%.
The chancellor announced more flexibility around how losses can be carried back which will bring immediate relief to many businesses.
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