Chancellor of the Exchequer Rishi Sunak has unveiled his 2021 Budget, setting out plans to help the economy on its road to recovery from the coronavirus crisis.
Addressing MPs in Parliament, the Chancellor announced measures to add further protection for jobs and support for businesses still reeling from the financial impact of the pandemic, as well as a series of tax hikes designed to help jump start the economy.
Furlough scheme extended
The Coronavirus Job Retention Scheme – which has helped pay the wages of thousands of employees unable to work during the pandemic – will be extended until the end of September.
While the Government will continue to pay 80% of employees’ wages for hours they cannot work, employers will be asked to contribute 10% in July and 20% in August and September.
It is hoped that the move will minimise job losses as COVID-19 restrictions are eased over the coming weeks and months.
Wider access to grants for the self employed
The Self-Employment Income Support Scheme [SEISS] will also be extended until the end of September – and its scope will now be widened to accommodate 600,000 more self-employed people who previously were not eligible.
Prior to the announcement, people must have filed a tax return for 2018/19 to apply, but those who have filed a 2019/20 return may now also be eligible.
A fourth grant covering the period from February to April will be worth 80% of people’s average trading profits, while the fifth and final grant from May will be targeted towards those most affected by the pandemic.
In a move that will effectively reverse the policy of his predecessor George Osborne, the Chancellor unveiled that the rate of corporation tax will rise to 25% in 2023.
Though the rate will be kept at 19% for 1.5 million smaller companies, the news will come as heavy blow for big businesses.
Defending the rise, the Chancellor said that it was a necessary part of balancing the books following the coronavirus crisis.
Income tax freezes
The personal income tax allowance will be frozen at £12,500 for this year as part of the bid to repair the nation’s finances.
While this will bring more people into paying the tax, the Chancellor said that such corrective action must be taken to avoid borrowing continuing at very high levels.
The higher rate threshold will also increase to £50,270 in 2022, but then be frozen for five years too.
A total of £5 billion will be put into new Restart Grants – a one-off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses – many of which have experienced huge disruption and severe financial turmoil over the past 12 months.
The funding brings the total spent on direct grants to businesses during the pandemic to £25 billion.
Further to this, hospitality and leisure businesses will not be expected to pay business rates for three months, and then rates will be discounted for the remaining nine months of the year by two-thirds.
The temporary holiday on Stamp Duty announced at the previous Budget will now be extended.
As expected, Stamp Duty holidays on properties up to £500,000 will continue until the end of June, and will be kept at double its standard level until the end of September, returning to normal levels from 1 October.
Furthermore, the Chancellor confirmed a mortgage guarantee to help first-time buyers access 95% mortgages.
Business tax cuts
In what he described as the biggest business tax cut in British history, the Chancellor pledged to offer companies the chance to reduce their bill by 130 per cent of any amount invested.
The idea, dubbed the ‘super deduction’ will effectively involve paying businesses to invest – something that has never been attempted before in the UK.
However, it was emphasised that the risk was necessary given the country’s need for an ‘investment led recovery’.
Low-income households have been hit especially hard by COVID-19, which is why the Government is extending its £20 uplift in Universal Credit for a further six months.
While there had been plans to slash Universal Credit by £85 a month from 12 April, the extension will throw a lifeline to around 6 million people who are currently claiming the benefit.
Tax Credit claimants will also receive the boost, but this will be in the form of a £500 one-off payment.
Increase to minimum wage
Millions of people are set to see their wages rise from 1 April following the Chancellor’s announcement of new minimum wage rates.
Basic rate workers will get a 2.2% increase, with the National Living Wage rising to £8.91 an hour.
For the first time, the Government’s highest rate will also include people aged 23 and over, who had previously fallen under the lower wage bracket.
If you would like further information on what these measures could mean for you, please contact Hiren Gandhi on 07917 811014 or at email@example.com