Everything you need to know about the UK’s 2021 Budget

Everything you need to know about the UK’s 2021 Budget

Chancellor Of The Exchequer Rishi Sunak announced his 2021 Budget on Wednesday 3rd March 2021. He based his new budget on a three-part plan to protect the jobs and livelihoods of the British people. His key three points were as follows;

  1. Continue to do whatever it takes to support the British people and businesses through the current period of crisis
  2. Begin to fix public finances now the UK is on its road to recovery
  3. Begin to work on building the UK’s future economy

The Chancellor assured the house that he would do “whatever it takes” to help rebuild the economy from what he claims is the ‘acute damage’ caused by COVID-19 over the last year and reiterated that his plans were ‘honest and bold’ throughout his announcement as he set out the plan for regrowth. Through the efforts made so far by the government, as well as those planned to be made following the budget announcement, the UK’s economy is expected to return to pre-covid levels by the middle of 2022, six months earlier than previously thought.

This year’s budget’s main focal point was to prioritise supporting those who had been hardest hit by the coronavirus pandemic – with extensions to the furlough scheme, self-employed support, business grants, loans, and VAT cuts.

This insight will cover the key points of Chancellor Rishi Sunak’s 2021, from housing to hospitality and coronavirus.

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Tax

The Chancellor’s announcements on taxes seemed to be a focal point for many. In his budget, Sunak announced;

  • An increase in corporation tax rate from April 2023 to 25% on profits of over £250,000. Smaller firms with profits under £50,000 will be able to continue enjoying a 19% tax rate, with only around 10% of companies expected to have to pay the higher rate of tax! Chancellor Rishi Sunak insisted that although the rate was being increased, the UK will still have the lowest corporation tax rate in the G7.
  • A new ‘super deduction’ tax relief for companies investing in qualifying new plant and machinery between 1 April 2021 and 31 March 2023. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim
    • A 130% super-deduction capital allowance on qualifying plant and machinery investments
    • A 50% first-year allowance for qualifying special rate assets.

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.

  • The standard 20% basic rate of Income Tax threshold will raise by a fraction, coming in at around £12,570 from £12,500 in April 2021, but is planned to remain frozen at this rate until 2026.
  • There was also an announcement for income tax exemptions for specific financial support payments, including those for financial support payments made by the UK Government and devolved administrations to potential victims of modern slavery and human trafficking.

VAT

The reduced rate of 5% VAT for the hospitality and tourism industries is due to be extended until the end of September. From October, a 12.5% increase for the next sixth months will begin, with hopes to support firms in moving back to 20% by April next year.

The British Public

The Chancellor emphasised in his opening remarks that this year’s budget was to focus on rebuilding our economy and supporting those most affected by the unprecedented pandemic. This support included:

  • A Universal Credit uplift of £20 a week will continue for a further six months, with eligible working tax credit claimants receiving one-off payments of £500.
  • The National Living Wage also saw an increase to £8.91, equivalent to an additional £350 a year for full-time workers over the age of 25.
  • A further £1.65billion of Government funding to ensure every adult is offered their first dose of the coronavirus vaccine by the end of July
  • And Test and Trace to receive support payments of £500 until this summer

Coronavirus

Furlough – One of the highly discussed points from the announcement was the extension of the Coronavirus Job Retention Scheme (CJRS or Furlough) until September of this year. This will allow millions to continue having 80% of their wages paid and will increase job security. The Chancellor announced a phased-out approach to ending the CJRS, with employers being expected to contribute 10% towards employees’ wages by July and then increasing to 20% in August and September as the scheme comes to an end. There will, however, be no effect on the employee and what they receive.

Self-Employment Income Support Scheme Payments – The SEISS is also due to be extended until September. The 2021 budget revealed details of a fourth grant covering 80% of three months’ average trading profits, which can be claimed from late April, with a single payment instalment (capped at £7,500) to cover the period February to April. A fifth and final grant was then announced, covering the period from May until the end of the scheme in September, with claims to be made in late July. This grant, however, will be determined by a turnover test – Where the self-employed business turnover has fallen by 30%, the grant will be worth 80% of three months’ average trading profits capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.

Around 600,000 extra newly self-employed people will be able to claim a support grant, assuming they have submitted their 2019-2020 tax return from earlier this year!

Business Support

Several business support schemes were highlighted in the announcement on the 3rd March, including:

  • A Recovery Loans Scheme to support businesses hit by the pandemic, replacing the previous government emergency funds of the bounce back loan scheme and coronavirus business interruption schemes which are due to expire this year. Under this new scheme, businesses of any size can apply for loans from £25,000 up to £10million through to the end of the year, with the Government underwriting the loans for up to 80% for participating lenders.
  • The Chancellor confirmed the £5billion restart grant for businesses to help companies get going’ after lockdown draws to an irreversible end. This scheme is planned to provide COVID hit firms up to £18,000 to boost their survival chances. The boost will be primarily aimed at retail, hospitality, accommodation, leisure, and personal care firms, with non-essential retailers being able to access £6,000 per business.
  • From April to September this year, companies’ incentives to take on Apprentices are set to double, with payments of £3,000 made to companies for each apprentice, up from the previous £1,5000. These payments will be made on top of existing £1,000 grants for apprentices aged 16 to 18 or those under 25 with an education, health, and care plan. From July, £7million will be available to support apprenticeships across multiple employers.
  • Eight new ‘Freeport’ areas were designated in The Chancellor’s speech. Businesses within the regions of East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside, and the Thames will be exempt from rates and stamp duty, and their customs processes will be simplified. This update has been anticipated since the UK officially left the European Union earlier this year, and the freeports are due to open later this year.

Hospitality

As one of the hardest-hit sectors over the last year, Chancellor Rishi Sunak was keen to express his supporting the hospitality sector’s recovery. One of the key updates he made in relation to this was the extension of freezing the Alcohol Duties. This would be for an unprecedented two years in a row, and the third time in a decade. Freezing duties across Scotch whisky, wine, cider, and beer The Chancellor Of The Exchequer said the freeze would save drinkers 2p on a pint of beer, 1p on a pint of cider, 8p on a standard bottle of wine, and 30p on a bottle of Scotch.

Business rates relief for those in the Hospitality and Leisure industries will also be extended for a further six months until June this year, and for the remaining 9 months, they will be reduced by two-thirds.

Housing

A welcome update – Sunak announced the extension of the stamp duty holiday until June 2021, encouraging ‘generation buy’. On top of this, a new policy for mortgage guarantees to help first-time buyers, providing access to 95% mortgages. The majority of large building banks, including NatWest, Lloyds, Santander, Barclays, and HSBC, will begin offering these mortgages to eligible buyers from next month. The Chancellor has said he is expecting Virgin Money to follow shortly after.

Sports and culture

A £700million Government investment into arts, culture, and sports institutions was announced in the Budget Session, extending £500million to the film and television restart scheme.

How can Animo help?

Our expert consultants highly anticipated the Budget announcement for 2021. We ensured we were more than prepared to support any new businesses with queries following the announcement! For a further breakdown of the key points from the announcement, look at our 2021 Budget Report. If you have any other questions following the information shared on 3rd March, or if you want to talk to us about something specific, get in contact today by calling +44 (0)207 060 0835, emailing info@animoassociates.com, or filling in a contact form below, and one of our consultants will be happy to help!

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Read Animo's 2021 Budget Report

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