4th March 2021 | 4 min read
Chancellor Rishi Sunak has unveiled his “honest” second Budget, setting out his plan to protect jobs and livelihoods, as well as build towards a future economy.
He warned that repairing the damage wrought by COVID-19 on the UK would take time with the economy having shrunk by 10% and government borrowing expected to hit £355bn this year and underlying debt to hit 97.1% of GDP in 2023-24. The highest levels since World War II.
The UK government has so far spent more than £280bn supporting people and businesses over the past year and Sunak announced a further £65bn of support in this Budget.
Even so, the OBR is also expecting a swift and more sustainable recovery for the UK with its economy back to its pre-Covid level by the middle of 2022, six months earlier than previously thought, and projected annual growth this year of 4%.
Here are the key takeaways from Sunak’s Budget 2021: Protecting the jobs and livelihoods of the British People
- As expected, the government’s furlough scheme has been extended to the end of September. There is no change for employees, but employers will be asked to contribute towards the cost of unworked hours starting at 10% in July and rising to 20% for August and September. At the end of January furloughed jobs hit 4.7 million, up from 4 million at the end of December.
- A fourth and fifth grant will be available via the Self-Employment Income Support Scheme. The fourth grant covering February to April will be worth 80% of three months’ average trading profits, capped at £7,500. It can be claimed from the end of April and to qualify the self-employed must have filed a 2019-2020 self-assessment tax return. The fifth grant will cover May to September and is to be determined by a turnover test. Those whose turnover has fallen by more than 30% will still be eligible for 80% of three months’ average trading profits, while for people whose turnover has fallen by less than 30% a 30% grant will be given, capped at £2,850.
- The business rates holiday for retail, hospitality and leisure has also been extended to the end of June. For the rest of 2021 business rates will be discounted by two thirds, up to the value of £2m per business. The current reduced VAT rate of 5% for hospitality and tourism businesses will be maintained until 1st October when an interim rate of 12.5% will be applied before returning to 20% in April next year.
- Replacing the Bounce Back Loans and Business Interruption Loans schemes, which are coming to an end, is the Loan Recovery Scheme. Businesses of any size can apply for loans ranging from £25,000 to £10m over what remains of 2021 with the government providing lenders with an 80% guarantee.
- The loss carry back scheme has also been extended. For 2020-21 and 2021-22 UK businesses may be able to obtain relief of up to £2m of losses over three years rather than the previous one year carryback, although companies that are a member of a corporate group will be subject to a £2m cap across the group as a whole.
- Corporation tax will increase in March 2023 for businesses with taxable profits above £50,000. A taper system will be introduced for those above this threshold, but firms with profits greater than £250,000 will see their corporation tax rise to 25%. Companies with profits of less than £50,000 will continue to be taxed at 19%.
- To boost productivity the government launched its Help to Grow scheme. Under the plans the government come Autumn will offer a 50% contribution, of up to £5,000, towards the purchase of approved productivity-enhancing software. MBA-style management training courses will also be offered by business schools across the country to upskill SMEs over the next three years, with the government covering 90% of the cost.
- Reform of the UK’s immigration system is also planned to help retain and attract highly skilled migrants, particularly with the tech, science and research sectors. By March 2022 an elite points-based visa will be introduced with fast-track visas available for those with job offers from scale-ups.
- Additionally to support scale-up firms within the R&D sector the government is launching a £375m co-investment product. The Future Fund: Breakthrough will see the British Business Bank take equity in funding rounds of over £20m led by private investors to ensure scale-ups have access to capital to grow. Pension regulations will also be reviewed to ensure pension schemes are not dissuaded from investing more broadly.
- And some businesses who invest in certain qualifying plant and machinery may also benefit from a super deduction, which means they might be able to offset their investment costs from their taxable profit.
All Information was sourced from HM Treasury Budget documents.