Budget 2021: Key Points

As many of us look forward to a potential end to COVID-19 restrictions, today’s 2021 budget announcement has been anxiously awaited by individuals and businesses alike. In this article, we outline the Government’s key tax and spending plans for the year ahead, providing insight (where possible), on how these announcements are likely to affect you.

Coronavirus

• The Furlough Scheme has been extended until the end of September 2021 
• There are no changes to employee terms, the 80% salary ‘hours not worked’ payments remain 
• However, businesses will be asked to contribute alongside the taxpayer from July onwards. In July, they will pay a 10% contribution, rising to 20% in August and September to furloughed staff 
• Support for the self-employed will also continue until September 
• Self-employed people’s turnover who has fallen over 30% will still receive 80% grant, and there will be a 30% grant for businesses whose turnover falls less than 30% 
• 600,000 more self-employed people can now apply for grants. This will bring the total spend to £33bn for the self-employed 
• To support low-income households, the £20 uplift of universal credit has been extended by 6 months 
• Working Tax Credit claimants will get a £500 one-off payment 
• The national living wage will increase to £8.91 from April onwards 
• An extra £1.6bn contribution to continue the distribution of the vaccine has been agreed 
• A new £150m fund to help local communities take ownership of theatres, pubs, or sports clubs 
• A new HMRC task force is to be implemented, with £100m of grants and 1000 new investigators dedicated to tackle fraud 

Business Grants 

• £5bn of new business grants will become available 
• The new ‘Restart Grant’ scheme is to begin in April for businesses
• Non-essential retail will be among the first to reopen. Businesses can receive up to £6,000 per premise 
• Hospitality (including personal care and gyms), may receive up to £18,000 per premise 
• Culture: £700m will become available for arts, culture, and sporting institutions 
• Film and Production will receive £500m in grants 
• A new scheme will be launched for arts apprenticeships 
• The Recovery Loan Scheme for businesses of any size: loans of £25,000 – £10m will be available until the end of this year 
• 100% business rates holiday is extended until the end of June. For the remainder of the year, business rates will still be discounted a third, up to £2m for those who have been able to stay open 

Hospitality and Tourism 

• The reduced rate of VAT (5%) for this sector has been extended until 30th September 
• After September, VAT will rise to 12.5%, until April 2022 when it is set to rise back to 20% 

Housing Sector  

• Stamp Duty Holiday: the £500,000 nil rate band will end on 30th June 
• The nil rate will then be £250,000 until end of September. It is set to return to £125,000 from 1st October 
• Mortgage guarantee: home buyers supported for 5% deposits 
• More 95% mortgages offered from next month by major UK banks 

 Social 

• £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee 
• Extra £19m of funding for domestic abuse programmes to support vulnerable women 
• £10m for veterans with mental health needs 

Education and Training 

• The incentive for employing apprentices has doubled. Businesses will now receive £3,000 per apprentice 
• £126m of new funds to triple the number of traineeships available  
• The Restart Programme will ensure people get lifetime skills and better employment chances 
• The government is to focus on small businesses gaining digital skills. This includes a 50% discount on digital productivity, up to £5,000 per business (register here) in order to become more innovative and profitable 
• Help to Grow: contributions to help thousands of small businesses to get management training. Business schools are set to develop new executive programmes, of which the government will contribute 90% of costs

Tax treatment of losses 

• Carry back losses of up to £2m of up to 3 years 
• Companies can claim additional tax refunds of £760k 
• Business tax – the UK will have a pro-business tax regime. To encourage this, the government are therefore encouraging business investment 
• Super Deduction: for next 2 years, when companies invest in plant and machinery, they can reduce their tax bill by 130% of the cost 

Duties  

• Increases in duties for spirits, wine, cider, and beer have all been cancelled 
• Therefore, all alcohol duties are frozen for 2nd year in a row 
• Fuel duties increase also cancelled 

Taxation (Overview) 

• No changes to rates of income tax, national insurance or VAT 
• Personal income tax allowance to be frozen at £12,570 from 2022 to 2026 
• Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026 
• In 2023, the rate of Corporation Tax on company profits will increase from 19% to 25%. This rate will only apply to businesses with profits more than £250,000
• There will be a taper above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate
• Rate to be kept at 19% for companies with profits of less than £50,000 
• Marginal relief provisions will also be introduced so that, where a company’s profits fall between the lower and upper limits, it will be able to claim an amount of marginal relief that bridges the gap between the lower and upper limits providing a gradual increase in the Corporation Tax rate. 
• Stamp duty holiday extended to June, with no levy on sales of under £500,000 
• No changes to inheritance tax or lifetime pension allowance or capital gains tax allowances 

Future Economy 

• There will be 2 wide ranging consultations to ensure Research & Development and enterprise management incentives are internationally competitive 
• A commitment to VISA reforms aimed at recruiting highly skilled migrants. This will include an unsponsored points-based visa rollout for science, research, and tech specialists. It will also ensure simplified bureaucracy for visa applications 
• A new economic Treasury Campus has been announced, based in Darlington. 750 Civil Servants will be relocated here 
• Over £1bn in grants for 45 new towns deals 
• An increased focus on investment trade 
• Seeking to replace industries of the past with green and innovative businesses 
• Commitment to green growth 
• Investment in green industry. First ever UK infrastructure bank (in Leeds) set to invest in public and private projects in infrastructure, expected at least a £40m investment 
• Funding new port infrastructure for wind farms 
• Monetary policy for bank of England to ensure environmental sustainability and transition to net zero 

Brexit and Foreign Trade 

• The announcement of Free Ports. These are special economic zones with different rules to make it easier and cheaper for business. This will provide infrastructure funding, cheaper customs with favourable VAT, tariffs, and duties 
• Freeports will be a UK-wide policy 
• 8 freeport locations have so far been announced: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside 
• These implementations will encourage green jobs, as well as producing a vast increase in job opportunities 

Economy Overview 

• The UK economy has shrunk 10% since 2020 
• The OBR (Office of Budget Responsibility) expect that in 5 years’ time, our economy will be 3% smaller than it would have been without the pandemic 
• The OBR forecasts economy may grow 4% this year, then 7.3%, 1.7%, 1.6% and 1.7% in following years