I thought it would be good to set out what the IABs response is to the budget and share our thoughts.
There’s actually quite a lot of optimism in the economy especially with recovery expected to be back to pre-covid levels by mid next year, which is a lot sooner than expected. Growth over the next quarter and into the next year is predicted to be at about 7%. Which is huge but in the context of the recession caused by lockdown it still leaves us a long way behind were we where.
The government has given us a roadmap out of lockdown so businesses can start planning, over the next few months – even though these might change, there is still a real sense that optimism.
Unemployment is not going to be as bad as people thought so the prediction that there would be 12% unemployment at its peak has not materialled. It is currently at about 6.5% which translates to nearly 2m people who won’t be unemployed. Sarah what’re your thoughts?
I think the chancellor has had to walk a fine line between repayment of borrowing versus getting businesses back on their feet and I think has done a relatively good job.
Overall I’d say it’s spending now, tax later budget.
I also think he has sheltered many small businesses from the inevitable tax increases so I would also say it’s a pro-small business budget.
Furlough Scheme has been a highly successful and I’m glad to see its been extended past June when we are anticipating business to be back to usual trading. The scheme is still being heavily relied on but I think it has largely done what it set out to do especially if we refer to the figures Janet quoted.
Although it’s not fully funded as before and we will see the tapering as we did last year, with 10% contribution by employers in July and 20% thereafter. I think this is a good way to wean businesses off the scheme.
There is now a 4th and 5th grant and crucially this now includes the newly self-employed, so this is now available to people with a 19/20 tax return whereas before these people did not qualify because they didn’t have an 18/19 one.
So a further 600,000 self-employed people will now be included.
There is a bit of an issue with the length of time between the grants with Grant 5 probably available around September time.
But overall I think this is a really positive response by government with 30 billion pounds made available to 2.7 million people. This has kept so many people going and will continue to do so way past June.
There were significance leaks before the budget and one area which was spoken about was the new set of cash grants
A new restart grant will start in April. These will be available in England and will be worth up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
Similar to the one-off cash grants which were allocated in Lockdown 1.
Recovery Loan Scheme
A new Recovery Loan Scheme will launch on 6th April and will be open to all businesses, including those who have already received support under the existing coronavirus guaranteed loan schemes. It will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.
In addition, there is also discretionary grants which are being made available from local authorities for those business that might not qualify.
The government is continuing support for the UK’s tourism and hospitality sector and will extend the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30th September 2021. Then from 1st October to 31st March 2022 a 12.5% rate will apply until returning to 20%.
Alcohol and fuel duty will also be frozen. This is the second year in a row that alcohol duty has been frozen, whilst fuel duty has been frozen for over a decade. We both have electric cars anyway!
Business Rates was a big area of concern, there isn’t the 100% business rates holiday that was hoped for the whole of the next FY but we did get 100% for 1stApril until 30th June. Then its 2/3rd off all the way though to April next year.
This has gone up but UK still has one of the lowest rates of CT in the world meaning that it can still stay competitive on the global stage, and there is still time to prepare the changes.
The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19%
You can now also bring forward losses from the previous 3yrs which also helps even the divide between those that have done well and those that have struggled during the lockdown.
Stamp Duty Land Tax (SDLT)
To keep the housing market buoyant – The current stamp duty holiday (in England and NI) will be extended until the end of June. The £500,000 nil rate band had been due to end on 31st March but will now continue until the end of June. Then from the 1st July to 30th September the nil rate band will be reduced to £250,000, before returning to the usual £125,000.
In addition to this a new mortgage scheme to help buyers with a low deposit will be launched. It will start from April and many major lenders say they will offer the 5% rates.
If we look at personal taxes – The income tax Personal Allowance will rise as planned to £12,570 from 5th April and will remain at this level until April 2026. The income tax at the higher rate threshold will rise as planned to £50,270 from 5th April and will remain at this level until April 2026. This is another example of postponing taxes.
The NMW is due to increase to £8.91 from 6th April but note that the age bandings have been reduced.
The Universal Credit uplift of £20 per week will continue for a further six months. In addition, working tax credit claimants will get equivalent support for a further six months.
Lot of money being talked about but really positive and a lot of support for small businesses while they go through this continued period of disruption. What I liked was that there was continued support as we come out the other side. For example, the Kickstart scheme. This has been given an additional boost with the apprenticeship bonus doubled to £3000 for every new apprentice hired between 1st April and 30th September 2021.
Yes, there’s defiantly money being made available to help to get things moving after lockdown as well as the short term covid responses. It wasn’t the radical budget we were expecting but it seems to have been received well from the business community.