The 2021 Budget
This week saw the Chancellor, Rishi Sunak, deliver the 2021 Budget, it was one of the most anticipated Budget for years. I’ve summarised the key points;
CJRS (furlough scheme)
The furlough scheme has been extended and will run until the end of September; it had been due to close at the end of April but will now be phased out in a similar way to what we saw last year with the tapering. Employees will continue to receive 80% percent of their salary, capped at £2500. In July employers will need to contribute 10% of wages, and the capped amount will reduce to £2187.50. This will increase to 20% contribution in August and September and capped at £1875. Employers will continue to pay for the associated Employer National Insurance and pension contributions throughout. Note: the eligibly criteria will change from 1st May to include those employed between the 20 March 2020 and 2nd March 2021.
Self-Employment Income Support Scheme (SEISS)
A fourth grant will be available from April (covering February, March & April). Those eligible can claim 80% of average monthly profits capped at £2.5k, provided their business had a new or continuing impact from the pandemic.
A fifth grant has also been confirmed to cover May to July however, the full 80% grant will only be available to people whose turnover has fallen by 30% or more. It is expected that claims may be made from late July.
Grants now allow 18/19 and 19/20 Self Assessments as evidence of earnings.
VAT reduction for the UK’s tourism and hospitality sector
The government 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%.
The 100% business rates holiday in England will also continue from 1stApril until 30th June.
This scheme 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.
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.
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.
Personal Allowance and higher rate threshold (HRT)
The income tax Personal Allowance will rise as planned to £12,570 from April 2021 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 April 2021 and will remain at this level until April 2026.
National Minimum Wage (NMW)
The NMW is due to increase to £8.91 from 6th April.
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.
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% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate.
In line with the increase in the main rate, the Diverted Profits Tax rate will rise to 31% from April 2023 so that it remains an effective deterrent against diverting profits out of the UK.
Stamp Duty Land Tax (SDLT)
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.
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.
Contactless Payment Limit
The contactless payment limit will rise to £100. That is up from £45 and officially took effect on Wednesday though in practice it may take longer for retailers to implement the increased limit.
The chancellor acknowledged that the amount the government has borrowed is matched only by the borrowing in the two world wars. In total the amount of fiscal support the government has given since the start of the pandemic comes in at 407 billion pounds. That will have to be paid for with tax rises but for now it seems his focus is on helping the economy to recover.