Chancellor of the Exchequer Rishi Sunak’s Budget set out the government’s plans for fixing the “acute damage” to public finances caused by the pandemic. These include new measures to help businesses and jobs through the months ahead and several tax-raising plans to rebalance the public purse.
Rishi Sunak opened his Budget by saying he would continue to do “whatever it takes” to support the economy through the pandemic. But he warned that it would take the country “a long time to recover from this extraordinary situation”.
The chancellor said that although the economy will recover more quickly than previously thought and GDP will grow by 4% this year, in five years’ time it will still be 3% small than it would have been without Covid.
- The Coronavirus Job Support Scheme (in other words, “furlough”) has been extended to September 2021. Employees will continue to receive 80% of their wages until the scheme ends, but employers will be asked to contribute 10% in July and 20% in August and September as the scheme is gradually phased out.
- The Self Employment Income Support (SEIS) scheme is also being extended to September this year. Under the scheme, 600,000 more people who filed a tax return in 2019-20 can now claim for the first time. The fourth grant will cover February to April and is worth 80% of average trading profits up to £7,500.
- As expected, the temporary cut in Stamp Duty Land Tax in England and Northern Ireland (which we wrote about here) has been extended until September 2021 to protect the housing market and create jobs, although after 1 July 2021, the nil rate band will be reduced to £250,000 from £500,000.
- A new mortgage guarantee scheme will enable UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.
- As the Bounce Back Loan (BBL) scheme and Coronavirus Business Interruption Loan Scheme (CBILS) come to an end, a new UK-wide Recovery Loan Scheme will be made available to help businesses through the next stage of recovery. This will offer loans between £25,001 and £10m, and asset and invoice finance between £1,000 and £10m.
- The Film & TV Production Restart scheme in the UK will be extended with an additional £300m available to support theatres, museums and other cultural organisations. There will also be a £300m recovery package for professional sport and £25m for grassroots football.
- The VAT cut to 5% for hospitality, accommodation and attractions across the UK will run until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022.
- 750,000 eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates relief.
- There will temporarily be an increased ability to carry back trading losses for both companies and the self-employed, to get back tax paid in earlier years.
The maximum rate of Corporation Tax will increase to 25% from 2023, which the Chancellor says will still be the lowest rate in the G7.
The rate will be tapered, and only businesses with profits greater than £250,000 will be taxed at the full 25% rate. Companies with profits of less than £50,000 (around 70% of actively trading companies) will continue to be taxed at 19%. There will be an adjustment to the limits for members of groups of companies.
However, starting in April 2021, a new 130% super-deduction will cut companies’ tax bills by 25p for every pound they invest in qualifying new equipment. This will be worth around £25bn to UK companies over the two years it will be in full effect.
Income tax and National Insurance
Income tax and National Insurance will not be raised, but as expected personal tax thresholds are being frozen. The personal tax threshold will stay at £12,750 until 2026. The higher rate income tax threshold will rise to £50,270 next year and remain at that level until 2026.
There will be no changes to VAT, Inheritance Tax, or Capital Gains Tax rates and allowances.
This is a snapshot of today’s Budget, and we will be writing more about some of the policies set out by the chancellor over the next few weeks.
If you would like to discuss any issue raised in the Budget, please call us on 020 7625 4545 or email us at email@example.com
Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.