Chancellor Rishi Sunak has presented his second Budget after a year of lockdowns, business closures and government spending estimated to be over £400 billion by the end of the financial year. Read on to find out what was covered in the speech.
With pressure to get the economy started again and to repay debt, there has been a lot of speculation as to whether taxes will be increased. The government has pledged to “protect jobs and livelihoods".
The chancellor put forward a three-part plan to:
- Support people and business
- Fix finances
- Build the future economy
The economy and fiscal forecasts
- The economy has shrunk by 10% and is not expected to return to its pre-Covid level until the middle of 2022.
- It is estimated that in five years’ time the economy will still be 3% smaller than it would have been without Covid.
- OBR – Growth forecast: 4% 2021, 7.3% 2022, 1.7% 2023, 1.6% 2024, 1.7% 2025
- Borrowing in 2022 forecast to be £234 billion and then increase by 4.4% in 2023, 3.5% in 2024, 2.9% in 2025 and 2.8% in 2026.
Support people and business
- Extension of the furlough scheme until 30 September 2021. Furloughed employees will continue to receive 80% of current salary, capped at £2,500 a month. Employers will be asked for a contribution of 10% from July and 20% in August and September.
- Self-Employed Income Support Scheme (SEISS) will provide a fourth grant covering February – April 2021 valued at 80% of three months' average trading profits (capped at £7,500). A fifth and final grant covering May – September 2021 will also be available ranging between 30%-80%, which will depend on the increase or decrease of the taxpayer’s average profits. Access to the grants will also be widened, making 600,000 more self-employed people eligible for government help, so long as their 2019/20 self-assessment has been filed.
- Restart grants will be available in April to help businesses that were hardest hit by the lockdown reopen. Non-Essential retailers, which are due to reopen in April, will receive up to £6,000 per premises, while businesses in the hospitality and leisure sectors, which will be closed until June, can apply for a grant of up to £18,000 per premises.
- There will be an extra £700 million of additional support to boost the culture and sporting sectors.
- The 100% business rates holiday will continue to end of June and then be discounted by up to two thirds for the remainder of the tax year.
- The £20 weekly Universal Credit uplift introduced last year will be extended for a further six months.
- The Stamp Duty holiday on properties worth up to £500,000 will be extended to 30 June 2021, then be reduced to £250,000 until 30 September 2021 before reducing to the original amount of £125,000 on 1 October 2021.
- First time buyers will be able to get a mortgage with a 5% deposit.
- A new Recovery Loan Scheme will be set up to get businesses operating again. Businesses can apply for loans from £25,000 to £10 million that will be 80% guaranteed by the government.
- The VAT rate for hospitality will remain at 5% until 30 September 2021, increase to 12.5% until 31 March 2022 and revert to 20% on 1 April 2022.
- Incentives for hiring apprentices will increase to £3,000 per hire.
Fix finances – taxes and duties
- Corporation Tax to increase to 25% for companies with profits over £250,000 in April 2023. There will be a small business rate of 19% where profits are less than £50,000 and a tapering regime for businesses with a profit greater than £50,000 up to a profit of £250,000.
- Companies will be able to carry back losses of up to £2 million for up to three years.
- There will be no rises in income tax, National Insurance or VAT.
- The basic rate income tax threshold will increase to £12,570 and higher rate threshold to £50,270. These will be frozen until 2026.
- National Living Wage to increase to £8.91 from 1 April 2021.
- Planned increase in spirits, beer, wine and cider duty cancelled.
- Fuel duty to be frozen
Build the future economy – investment and environment
- A “super deduction” will be available for the next two years for business investment. A deduction of 130% will be allowable against corporation tax.
- Introduction of green savings bonds giving investors the opportunity to buy into projects dedicated to accelerating the UK’s push to become a net-zero economy.
- New Help to Grow programme to help small and medium sized businesses with executive development (management) and free online advice and reduced software costs (digital).
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