Chancellor Rishi Sunak delivered his budget speech today, 3rd March 2021. His second budget since the outbreak of COVID-19. Mr Sunak announced a raft of measures to support businesses, protect jobs and the livelihoods of the British people.
The furlough scheme will continue until the end of September. The government will continue to pay 80% of wages. Employers will be asked to pay 10% in July and 20% in the months of August and September.
For periods from 1 May 2021 onwards, employers will be able to claim for eligible employees who were on employers’ PAYE payrolls on 2 March 2021. This means they must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying HMRC of earnings for that employee.
Further grants for the self-employed
The Self-Employment Income Support Scheme has been extended. The 4th grant will cover February to April, worth 80% of average trading profits up to £7,500. A 5th grant will be available from July.
Grants for the high street
A new £5bn fund was announced to support the high street. Restart Grants are to be offered to businesses in the hospitality, accommodation, leisure, personal care and gym sectors in England. These grants will be worth up to £18,000.
A new loan scheme, the Recovery Loan Scheme, will be launched. Loans under the scheme will have 80% of their value backed by the Government. The loans offered under the scheme can range from £25,000 to £10m.
Business rates holiday to be extended to June
Mr Sunak confirmed the business rates holiday will be extended to the end of June.
“For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open,” he says.
Personal taxes, wages and pensions
The income tax basic rate will rise to £12,570 up from £12,500, which will remain until 2026.
For higher-rate payers, the threshold will be £50,270.
The tax threshold for national insurance contributions will rise from £9,500 to £9,568.
The national living wage will rise to £8.91 for over 23s from April.
UC top-up to continue
The Universal Credit top-up of £20-per-week will continue for a further six months
Incentives for hiring apprentices
The apprenticeship hiring incentive in England is to be extended to September 2021 and the payment will be increased to £3,000. Additionally, an extra £126m will be provided to fund 40,000 more traineeships in England for 16-24 year olds in 2021/22 academic year.
Other taxes such as capital gains tax, inheritance tax, and VAT will remain at their current rates until 2026.
The pension lifetime allowance will also remain frozen.
Corporation tax will rise to 25% from April 2023.
The Chancellor also said he is creating a Small Profits Rate to ensure only businesses with profits of over £250,000 will be taxed at the 25% rate. Small businesses with profits under £50,000 will remain taxed at 19%.
Businesses can benefit from a temporary extension to the period for which losses can be carried back and offset against prior profits. The carry-back period has increased from 1 year to 3 years for a limited period. For unincorporated businesses, the extended carryback will apply to losses incurred in 2020/21 and 2021/22. For companies, it will apply to losses incurred in accounting periods ending between 1 April 2020 and 31 March 2021 and 1 April 2021 and 31 March 2022 (subject to a cap of £2m for each accounting period).
The 5% reduced rate of VAT for tourism and hospitality will be extended for six months to the end of September.
The VAT registration threshold will also remain at £85,000.
Super-deduction for capital expenditure
Form April 2021, for a two year period, companies can reduce their tax bill by 130% of the costs of investments. The Chancellor called this Super Deduction.
The stamp duty cut will continue until the end of June, with the nil rate band set at £250,000. From October, the threshold will return to £125,000.
The mortgage guarantee scheme will encourage lenders to offer 95% mortgages, making homeownership more accessible to those with a smaller deposit.
Mr Sunak’s second budget aims to support businesses in the short to medium term. He will be hoping for a sharp economic recovery before the effect of tax rises kick in.
This budget supports the governments slow easing of lockdown. The 2 are inextricably linked. If we cannot re-open the economy and bounce back quickly, then darker days will surely be on the horizon come autumn. As the tap will likely be tightened, even if restrictions continue. Sir Keir Starmer criticised the Chancellor for not prioritising the NHS and social care sector, accusing Chancellor of ‘papering over the cracks’.
This budget will see the country’s tax burden rise to its highest level since 1969. If you would like to discuss how the budget could affect your business, feel free to contact Accounting Inc.