Since Chancellor Rishi Sunak delivered his first UK Budget Statement in March 2020, a great deal has changed.
On the day of his Budget announcements last year, the World Health Organisation had just declared a global pandemic. The first death from COVID in the UK had been recorded and case numbers were growing. The Chancellor’s budget included some initial measures to deal with the predicted likely disruption, but he (like many of us) probably did not envisage the huge impact the virus would have on us as individuals, to our businesses and to the national economy. The word ‘furlough’ did not even appear in his speech.
One year on and the Government is now facing the highest level of borrowing since the Wars and has so far provided more than £280 billion in fiscal support. The economy has dropped by 10% and around 700,000 people have lost their jobs. Faced with this dramatic and almost unprecedented economic landscape, what did the Chancellor include in this year’s Budget?
In summary, he unveiled a plan that focused on three main areas:
- Supporting the jobs and livelihoods of the British people
- Once the country is on its way to recovery, focusing on fixing public finances
- Beginning work to build Britain’s future economy
Specific key measures introduced were:
1. Supporting the jobs and livelihoods of the British People
Extension to the Furlough Scheme and Self-Employed Support Schemes
The Furlough Scheme has been extended until the end of September 2021. Nothing will change for employees in terms of the amount of salary they will receive (80% of hours not worked up to a maximum of £2,500 per employee per month). Employers will have to contribute 10% towards the costs in July, and then 20% for the months of August and September.
In terms of the Self-Employed Support Scheme, this too has been extended until September 2021. For the fourth grant payable (covering the period February – April 2021) grants of 80% of average turnover will be available. The fifth and final grant (covering the period until September 2021) will be more targeted. For those businesses that have faced a fall in turnover of more than 30%, the full 80% grant will be payable. For businesses whose turnover has fallen less than 30%, a 30% grant will be payable.
Changes were also announced in terms of new business start-ups being able to access the grants. The Chancellor announced today that provided they had filed a tax return by midnight last night (2 March), they would be eligible to claim for the 4th and 5th grants.
Individual Benefits and National Living Wage
The £20 per week uplift to Universal Credit payments will continue until September.
The National Living Wage will increase from £8.72 to £8.91 per hour from April 2021.
Apprenticeships and Traineeships
A doubling of incentive payments to businesses (to £3,000) for all new apprentices of any age they hire. Additional money was also announced for Government Traineeship Programmes.
New Restart Grants and Loans
Cash grants are available for the retail, hospitality and leisure sectors to help with restart costs. These amount to up to £6,000 per premises in the non-essential retail sector and up to £18,000 for businesses in the hospitality and leisure sector (including personal care and gyms). An additional £700 million will also be available to support arts, cultural and sporting venues as they re-open for business.
The Chancellor also announced a new Recovery Loan Scheme that can be accessed by any business of any size. Loans can range from £25,000 to £10 million, 80% guaranteed to lenders by Government.
Business Rates and VAT
Businesses in the retail, hospitality and leisure sector will be given an extension to the current Business Rates holiday for the first three months of the forthcoming tax year (ie from April to June). From July 2021 to March 2022, a discount of up to 2/3rds on Business Rates will be available, dependent upon whether or not the business has been able to trade.
The 5% reduced rate of VAT for hospitality and tourism businesses has been extended until 30 September. After that time, an interim rate of 12.5% will be applied until April 2022 when the standard rate (20%) will be payable.
The current threshold of £500,000 before stamp duty is payable on house purchases has been extended until 30 June. After that time, an interim threshold of £250,000 will be set. From 1 October 2021, the threshold will revert to £125,000.
The Chancellor also introduced a new Government backed mortgage guarantee scheme accessible to those who can only afford to pay a 5% deposit. He said that certain banks were already on board – Lloyds, Nat West, Santander, Barclays and HSBC – with others expected to join soon.
2. Fixing Public Finances
Personal Income Tax Thresholds
There are no increases to Income Tax, National Insurance or Value Added Tax in this year’s budget.
However, personal Income Tax thresholds will be held at their current rates for this year. From the next financial year (2022-23), the Basic Rate Personal Tax threshold will increase to £12,570 and for Higher Rate it will be £50,270. These thresholds will then remain the same until April 2026.
Inheritance Tax, Pensions Lifetime Allowance and Annual Exemption rates for Capital Gains Tax will all remain the same until April 2026.
From 2023, businesses will face a new rate of Corporation Tax. This will amount to up to 25% payable on company profits.
Businesses that generate less than £50,000 in profits will be liable for a lower rate of 19% Corporation Tax.
For businesses who generate more than £50,000 in profits, Corporation Tax will be tapered, with only the largest corporations (around 10% of all businesses) liable for the full 25%.
Plans for increases in spirit duties have been cancelled. All duties on alcohol have been frozen at current rates.
Planned increases to duties on fuel have also been cancelled.
3. Britain’s Future Economy
The Chancellor announced a swathe of incentives, particularly to encourage investment and development of green infrastructure programmes and to establish Great Britain as the world’s ‘scientific superpower’. For example, funding for offshore wind infrastructure at Teeside, the creation of a new Green Savings Project and efforts to establish the City of London as the global leader for the carbon offset market.
In addition, there are plans to address Britain’s productivity issues through the creation of ‘Help to Grow’ subsidised training programmes focussing initially on management training and digital skills.
To demonstrate its commitment to representing all of the UK, the Chancellor highlighted a number of accelerated growth hubs being developed in Scotland, Wales and Northern Ireland, as well as the Treasury’s new northern campus to be located in Darlington.
The Chancellor’s final announcement concerned the establishment of eight new Freeports in England, due to come into operation later this year. These will be located at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City, Plymouth, Solent, Thames and Teeside and are intended to encourage trade and regenerate deprived areas in the country.
Ending his speech with a quote from Alfred Lord Tennyson, “That which we are, we are,” the Chancellor emphasised his wish to be transparent and honest with the British public in terms of the situation in which we find ourselves.
Today’s budget was the Chancellor’s – and the Government’s – attempt to set us along the right path. It will certainly be a long haul; in fact the Chancellor admitted that it will be the work of many governments over many decades. Only time will tell whether we’re heading in the right direction.