Earlier this afternoon, the Chancellor of the Exchequer, Rishi Sunak delivered his 2021 budget and I felt it would be useful to provide you with a brief outline of this, particularly in light of the ongoing Coronavirus pandemic and its effect on our economy.
The OBR (Office for Budget Responsibility) predicts that our economy will return to ‘pre-covid’ levels by the middle of 2022, six months earlier than previously projected.
Economic growth is forecast at 4% for 2021, 7.3% by 2022 and then 1.7% up to 2025 which is pleasing to see.
I have briefly summarised the key areas and announcements made:
- The furlough scheme will be extended until 1st October. From 1st July, employers will be expected to contribute between 10% and 20% toward the cost of any furloughed members of staff.
- Support for the self-employed will continue until 1st October with a fourth grant being made available for those eligible. A fifth grant will then be made available from October until the end of the tax-year.
- The support for low-income households will be extended for a further six months with the uplift in Universal Credit being maintained at £20 per week and a one-off payment of £500 being available for those eligible for Working Tax Credits.
- The direct cash grants that were due to end at the of this month, will be replaced by restart grants of up to £18,000 from April to aid businesses effected by the pandemic.
- Business loans of between £25,000 and £100,000 will continue to be available with the government providing a guarantee to lenders of up to 80%.
- Business rate holidays will continue until the end of June at which point, they will resume but at a discounted rated of 2/3rds until the end of the current tax-year.
- The Stamp Duty Land Tax holiday will be extended until the 30th June at which point the nil rate threshold will be increased from £125,000 to £250,000 until the 1st October when it will return to the usual levels.
- 95% mortgages for first-time buyers will be once again made available and backed by a government guarantees with many high street lenders already signing up to the scheme.
Whilst all of the above support is encouraging to see from both an economic and welfare perspective, it has come at a cost with the UK’s borrowing at it’s highest level outside of war time.
The Chancellor has announced measures to reduce the level of borrowing over the next 5 years:
- Corporation Tax will be increased from 19% to 25% from April 2023 however, for businesses with profits under £50,000, a Small Profit Rate of 19% will apply with a tapered rate for profits between £50,000 and £250,000.
- Tax free income thresholds will rise to £12,570 for the 2021/2022 tax-year and will then be frozen until 2026.
- The higher rate threshold will rise to £50,270 for the 2021/2022 tax-year and will then be frozen until 2026.
- Inheritance Tax thresholds, the Lifetime Allowance limit and annual exempt amount of Capital Gains Tax will be maintained at their current levels until April 2026 with no changes to the current rates.
The Chancellor also confirmed that there will be no rises in Income Tax, National Insurance or VAT rates for the current tax year.
With today’s announcements, the governments cautious road map to ‘normal life’ and the successful vaccine rollout, we remain optimistic for 2021, however we are aware that we continue to live in worrying times.
Please do not hesitate to contact us if you have any questions or concerns around any of today’s announcements or any other matters.