Earlier today (March 3rd), Rishi Sunak, the Chancellor of the Exchequer, announced the Budget for the coming year. From extending the furlough scheme to raising corporation tax, here's a roundup of the key points.
With the pandemic impacting everything from the housing market to employment over the past year, the announcement of the Chancellor's Budget for 2021 has been a much-anticipated affair. Today, Rishi Sunak delivered a statement announcing the key decisions that the Government will be taking going forward.
In his hour-long statement, the Chancellor covered everything from the furlough scheme to corporation tax, support for the self-employed, to changes to the housing market. We've detailed a summary of the main points, but there's a lot we've left out. We'll be analysing the details closely over the next few days so that our team of professionals is fully equipped to help you to understand and take advantage of the changes, whether you are a business or an individual. In the meantime, if you would like to read the full Budget Report you can do so here.
Extension Of The Furlough Scheme
The furlough scheme, which was due to end on the 31st March, will be extended to the end of September 2021. For employees, the rules will not change and they will still continue to collect 80% of their wages for the extended period. Businesses however will be expected to pay for 10% of the furloughed worker's wages in July, rising to 20% in August and September.
Extension of Business Rates Relief
Business Rates Relief, which was due to end on the 31st of March, has now been extended until the end of June. For businesses that are still unable to open after this period, a 66% discount will remain available, up to a value of £2 million for nine months.
Corporation Tax Will Rise By 6% - With A Tax Break Clause
Corporation Tax will rise by 6%, from 19% to 25%, from April 2023. However, companies with profits of less than £50,000 will still pay 19%, meaning that 1.5 million smaller firms will be unaffected. A tapered rate will apply to those with profits between £50,000 and £250,000.
Big Tax Credits for Investment
A 'super-deduction' tax break will be available for firms that invest. It could allow companies to reduce their tax by 130% of what they spend on investment. This is a new initiative backed by the OBR who think it could 'boost investment by 10%.' The Chancellor says an example of this could be 'a firm spending £10m on equipment gets a £2.6m tax reduction. Under this plan it would receive one worth up to £30m.'
Inclusive Support Schemes For The Self Employed
Two further support packages have been announced for the self employed. A SEISS grant will provide 80% of three months average earnings up to a £7,500 total. This will cover the months from February until April 2021 and will be available to apply for in April.
Another support package will be offered from May onwards, offering three months of average earnings.
In order to protect the most vulnerable self employed, those who have suffered a loss of income by 30% or more will receive 80%, which caps at £7,500 however those who have lost less than 30% of their income will receive a reduced grant of 30%, which caps at £2,850.
The government has extended the eligibility of these schemes to include those that have filed a tax return before midnight on the 2nd March, which was the extended tax return deadline. This will potentially mean that 600,000 more people will be eligible to apply.
Stamp Duty Extension & Mortgage Guarantee
The cut to the Stamp Duty Land Tax, which was expected to end on the 31st March, will be extended until the 30th June. In addition, to encourage lenders to accept smaller, 5% deposits, the government have announced a mortgage guarantee scheme which will enable UK buyers to secure a mortgage up to £600,000 with a 5% deposit.
Our Head of Property at our legal arm, Woolley Beardsleys & Bosworth Solicitors, has commented further on these proposals and you can read her article here.
Frozen Personal Tax Allowance
The Personal Tax Allowance will be frozen for five years. The basic allowance will rise to £12,570, and the higher rate threshold will go up to £50,270. However, both will be frozen at that amount until 2026. This means that no-one will be worse off, but assuming that earnings continue to rise people will be less well off than they could have expected before this change.
Eight Free Ports Will Be Established - including at EMA
Freeports, which are areas with significant tax concessions to encourage economic activity, will be established across the UK. The Chancellor states: " They will have different rules, making it easier and cheaper to do business." The eight locations for free ports are: East Midlands Airport, Liverpool, Felixstowe, Humber, Plymouth, Thames, Teesside, and Solent.
This is good news for our local region and a success for the campaign to establish a free port in the East Midlands. Click here to find out more about the bid from East Midlands Chamber.
No Change to Inheritance Tax, Capital Gains Tax, Pensions Allowances
The Chancellor left all of the existing allowances unchanged in these areas.
Alcohol, Tobacco And Fuel
All alcohol duties are to be frozen for the second year running, and there will be no extra duties on spirits, wine, cider or beer. Fuel duty will also be frozen for the 11th consecutive year.
Environment, Transport, Infrastructure And Housing
The Chancellor spoke animatedly about the need to invest in our nation's future, with a raft of measures to encourage green initiatives particularly. Among these were a new UK Infrastructure Bank to be set up in Leeds with an initial £12bn in capital, with the aim of funding £40bn worth of public and private projects, and £15bn in green bonds, including for retail investors through NS&I, to help finance the transition to net zero by 2050. We look forward to reading more detail on these soon.
Our team of experts are on top of the Budget changes and can answer any questions you have relating to how they might impact you. Why not drop us an email with your query? Alternatively, to see a full list of announcements for the Budget for this year, take a look at the government website here.
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