2021 Budget Statement: the current issues
The budget, released on 3rd March 2021, was set to be a balancing act for Rishi Sunak. Considerations such as the health of the economy from extensive borrowing had to be weighed against those suffering most from the pandemic. Rishi aimed to set out a plan for the foreseeable future as well as a road map for the recovery of our economy and how we will reduce our borrowing and begin to pay it back.
- The scheme has been extended to the end of September 2021
- However, support will begin to tapper down from the 1st July.
- This means up until the end of June the Government will continue to pay 80% of wages up to the amount of £2,500 per month.
- From the 1st July the Government will pay 70% of wages up to £2,187.50 per month and employers will cover the other 10%.
- This support will reduce again on the 1st August with the government paying 60% of wages up to £1,875 and employers will cover the remaining 20%
SELF-EMPLOYED INCOME SUPPORT
- 600,000 People who declared themselves self- employed in the 2019-2020 tax return will now be included and will receive benefits from the scheme.
- A fourth grant will be available from April, worth 80% of three months’ average trading profits up to £7,500
- A 5th and final grant will be available from July.
OTHER PERSONAL MEASURES
- Stamp duty land tax extension of the reduction until September 2021
- A new mortgage guarantee enabling buyers to secure a mortgage up to £600,000 with a 5% deposit.
- A 6-month extension of the £20 per week Universal Credit uplift and a one-off payment of £500 to eligible Working Tax Credit claimants across the UK.
- Income and Inheritance Tax maintaining their current levels.
GOVERNMENT-BACKED LOAN SCHEMES
- The new Recovery Loan Scheme has been bought in as the Bounce Back Loan and Coronavirus Interruption Loan schemes end at the end of March.
- Any business, of any size, will be eligible for loans from £25,000 up to £10 million through to the end of this year with the Government providing an 80% guarantee to lenders.
BUSINESS RATES RELIEF
- There is to be a temporary 100% tax cut for businesses in the hospitality, retail and leisure sectors and this is to be extended until the end of June.
- After June, for the remainder of the financial year, business rates will be discounted by two thirds for closed businesses up to the value of £2 million.
- £5 billion in grants for businesses in the hospitality, retail and leisure centre
- Non-essential retailers will be eligible for up to £6,000.
- Hospitality and leisure businesses will be eligible for up to £18,000
- English local authorities will be provided with an additional £425 million of discretionary business grant funding.
HOSPITALITY SECTOR VAT
- Until the end of September VAT will remain at 5% rather than 20%.
- Until April 2022 an interim rate of 12.5 will be in place.
2021 Budget Statement: looking to the future.
Due to high levels of borrowing to support people and businesses through the pandemic the Government is currently in significant debt. The aim in the coming months and years is to stop borrowing and pay back the existing debts. In order to do this there has been a lot of speculation over taxes.
CORPORATION TAX RISE
- Corporation Tax on company profits is set to rise, but only from 2021 and only for some businesses.
- The current rate is 19%, and the companies that earn £50,000 profit or less will remain paying this rate.
- For those companies that earn greater than £50,000, their corporation tax will be tapered up to 25% for businesses earning over £250,000 profit.
INCOME TAX FREEZE
- Thresholds for income tax will be frozen at £12,500 for the 20% basic rate of income tax and £50,000 for the 40% rate, from April 2022 until April 2026.
SUPER DEDUCTION SCHEME
- In order to support businesses recover from the pandemic, the budget set out a new scheme.
- The scheme allows businesses to claim 130% of their new machinery cost as a tax cut.
- The Treasury recognised this as the single biggest tax cut in recent history.
The continued support for both individuals and businesses across the UK all means that there is a stronger chance for us to be back on our feet as soon as we can. Over the next 12 months and into the future, these measures will mean millions will be able to get back out into the world and restore many unfortunate businesses to a profitable position moving forwards. Further forwards, it will also assist with the repaying of the significant debt from the spending over the last year. If you have any questions about the changes that could affect your clients’ businesses, or if you need to ask us questions on your clients’ behalf, give us a call on 01823 216156, or email us at email@example.com – we can help you.