Spring Budget 2021
The highly anticipated Spring Budget was delivered by Chancellor of the Exchequer Rishi Sunak on the 3rd of March which set out the Government’s post Covid-19 recovery plan for the next few years. As expected, Covid-19 was the main feature of this year’s budget due to the £280 billion Government support already received by individuals and businesses across the UK, however Mr Sunak was optimistic in introducing the three-part plan to support the livelihood of UK’s people and business, fixing public finances and building a future economy. Mr Sunak was convinced that with this year’s Budget, the UK’s economy would return to its pre-Covid level by the middle of 2022, however he did warn that our economy would be 3% smaller in 5 years’ time than what it would’ve been without Covid.
We have set out some of the main policies and changes to be introduced below:
- The Furlough Scheme will be extended until the end of September this year, with the Government continuing to pay 80% of workers’ salary. Employers will be asked to contribute to the Scheme by 10% from July and 20% from August.
- The Self-employed Income Support Scheme will also continue until September with two more claim periods between February to May and June to September. The Scheme will continue to pay 80% of the average trading profits. The only difference in support is that if turnover has fallen by more than 30%, then the full 80% payment will be made, however if turnover has fallen by less than 30%, only a 30% grant will be payable. The Scheme will now also be open to any Self-employed individual, as long as they have filed a tax return before midnight on the 3rd of March 2021.
- The Universal credit increase of £20 a week will continue for a further six months.
- Working Tax Credit Claimants will also be eligible for a £500 one-off payment for the next six months.
- There will be an increase in the National Minimum Wage to £8.91 per hour from April.
- Incentive payments for hiring new apprentices are being doubled to £3,000 while £126m will be invested to triple the number of new traineeships.
- Bounce-back and other Coronavirus loans for businesses will be replaced by a new Recovery Loan Scheme where businesses of any size can apply for loans between £25,000 and £10 million until the end of this year. The Government will also provide a guarantee of 80% to these lenders.
- A new “Restart” Business Grant is to be introduced to help businesses reopen and get going again due to being closed during lockdown where non-essential retail businesses will be eligible for grants of up to £6,000 per premises. Hospitality and leisure businesses, which include personal care and gyms who will reopen later will be eligible for grants of up to £18,000.
- There will also be £700 million available for arts, culture and sporting institutions.
- The 100% business rates holiday for retail, hospitality and leisure sector businesses has been extended until the end of June. Then from June until April the business rates will be discounted by 2/3 up to the value of £2 million for businesses that are closed due to Coronavirus, with a lower cap for those businesses that have remained open.
- There will be an extension of the reduced rate of 5% VAT for the hospitality and tourism sectors until the end of September. Following this, there will be an interim rate of 12.5% for another 6 months and then returning to the standard rate of 20% in April next year.
- The Stamp Duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June. Following this the Stamp Duty Holiday will apply to properties up to £250,000 until the end of September, then returning to £125,000 limit from October 1st
- The Government will guarantee 95% mortgages to help those who can only afford a 5% deposit from next month onwards which will give people who can’t afford a deposit a chance to buy their own homes.
- Personal income tax thresholds will be frozen from next year until 2026 – at £12,570 for the basic rate and at £50,270 for the higher rate.
- National Insurance rates will also be frozen.
- Inheritance Tax thresholds, Pension Lifetime Allowance and the Capital Gains Tax Annual Exemption will also stay the same until April 2026.
- VAT registration threshold will stay the same until April 2022 at a rate of £85,000.
- From 2023, the rate of Corporation Tax paid on company profits will increase to 25%. However, Mr Sunak assured that most businesses won’t be subject to this increase as businesses with profits of under £50,000 will be subject to the small profits rate of 19% therefore 70% of companies will be unaffected by the increase. In reality only 10% of businesses will pay this new higher rate.
- Tax treatment of business losses will also be more generous for the next two years where businesses will be able to carry back their losses of up to £2 million for three years.
- A new “Super Deduction” will also be introduced for the next two years to encourage companies to make business investments which will allow them to reduce their tax bill by 130% of the cost.
- Alcohol and fuel duty increases are frozen.
- The Government is also keen to attract investment into the green industry and has therefore created a new UK Infrastructure Bank costing £12 billion which is to be located in Leeds to enable investment across the UK into public and private projects to boost the ‘green industrial revolution’.
- The Government is also keen on investing in offshore wind in the near future.
- A new ‘Help to Grow’ Scheme will be introduced in the Autumn to help businesses in two ways:
- The Help to Grow Management Scheme will provide training to businesses to develop and enhance with the Government contributing 90% of the cost; and
- The Help to Grow Digital Scheme will help small businesses to gain access to free expert training into the digital world with a 50% discount on new productivity enhancing software worth £5,000 each.
- Applications can be made now at gov.uk/helptogrow.
- Visa reforms are to be introduced to attract high skilled workers from the Scientific, Technology and Entrepreneurial world.
- A ‘Levelling Up’ Fund has been created which invites applications from local authorities across the UK for funding for their area.
- ‘Freeports’ are being created across the UK which will be economic zones with cheaper business rates, simpler planning processes, infrastructure funding, cheaper customs and lower tax rates.
As can be seen, Rishi Sunak introduced a comprehensive package of measures to begin the process of rebuilding the economy following the effects of Covid-19. Several recent reports suggested that the Budget would introduce significant cuts as to the various reliefs farmers gain the benefit of in relation to Inheritance Tax and Capital Gains Tax, however this was not the case. Mr Sunak did warn however that interest rates and inflation won’t be low forever therefore some tax cuts have been introduced as a first step, however further cuts will be necessary in future, which could again potentially mean some cuts in relation to Agricultural Property Relief under the Inheritance Tax Regime for example.
If you would like to discuss any of the above, or would like any assistance in applying for any of these Schemes or Loans then please contact our office on 01558 650381.