The Spring Budget 2021: A Summary
As the UK eagerly tuned in to the most anticipated Budget for a generation, many were left wondering what the Chancellor’s traditional “rabbit out of a hat” might contain - especially as several big measures had been announced beforehand.
Here is a quick glance at the main points from today’s announcements.
The UK economy shrank by 10% in 2020. More than 700,000 people lost their jobs since the pandemic began and UK borrowing hit a peacetime record of £355bn this year.
But, the economic forecasts for 2021 show a rebound in 2021, with projected annual growth of 4%. Then it is hoped the economy will return to pre-Covid levels by the middle of 2022 - in what the Chancellor says is six months earlier than forecasted.
Many were worried about the impact on jobs if the current furlough scheme was brought to an end too early. However, the Chancellor has announced an extension to furlough until the end of September. After then employers will be asked to contribute 10% in July and 20% in August and September.
Other employment support
There will be more support for the self-employed too, as the existing schemes remain in place until September. The Chancellor has also added 600,000 more self-employed people into the eligibility criteria as grant access is widened.
The £20 uplift in Universal Credit will also stay in place for another six months and those claiming working tax credit will get a £500 one-off payment.
The minimum wage will increase to £8.91 an hour from April 2021. However, there will be no changes to rates of income tax, national insurance or VAT. The personal income tax allowance will be frozen at £12,570 from April 2022 to 2026, for higher rate income tax payers it will be frozen at £50,270 from 2022 to 2026.
Mr Sunak already announced plans to extend the Stamp Duty Land Tax (SDLT) holiday announced last summer and today he released the details. The current scheme will no longer expire on 31st March, but instead, property purchases in England and Northern Ireland will enjoy an extension of the holiday until June, with no tax liability on sales of less than £500,000.
Corporation tax on company profits to rise from 19% to 25% in April 2023
Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000
No changes to inheritance tax or lifetime pension allowance or capital gains tax allowances
Tax breaks for firms to "unlock" £20bn worth of business investment
Firms will be able "deduct" investment costs from tax bills, reducing taxable profits by 130%
Business and leisure
No doubt, many businesses today will welcome the news that the business rates holiday for firms in England to continue until June. After that, there will be a 75% discount.
For hospitality businesses, there is the continuation of the 5% VAT rate until September plus, there will be a £5bn “re-opening fund” for non-essential businesses initially worth up to £6,000 per premises. There will be a £150m for community groups to take over pubs at risk of closure All alcohol duties to be frozen for second year running and there will be no extra duties on spirits, wine, cider or beer.
Fuel duty to be frozen for eleventh consecutive year and the limit on contactless payments will also rise to £100 later this year.
Plus, there will be gains for the arts sector too in the form of a £400m grant to help arts venues in England, including museums and galleries, re-open, as well as a £300m recovery package for professional sport and £25m for grassroots football.
The Chancellor also announced funding in the form of grants for the following:
- Incentive grants for apprenticeships to rise to £3,000 and £126m for traineeships
- £19m for domestic violence programmes, funding network of respite rooms for homeless women
- £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee
Many may have seen this as the Chancellor’s “rabbit” moment, when he announced the first eight sites for freeports in England. These are for goods that arrive into freeports from abroad aren't subject to the tax charges, called tariffs, that are normally paid to the government.
These taxes are only paid if the goods leave the freeport and are moved elsewhere in the UK.
The eight sites for freeports are:
- East Midlands Airport
- Felixstowe and Harwich
- Humber region
- Liverpool City Region