Budget 2021: Setting the scene for what’s to come – support now, but paying back later.

When the Chancellor, Rishi Sunak took to the stand to deliver Budget 2021 earlier this afternoon, it seemed that most of us already knew what to expect, thanks to the various leaks and announcements over the last few days.

Rishi outlined that now is still too early for any major changes, but gave a hint of what is to come with some scheduled corporation tax changes.  At least we have notice on what is coming.

The slightly surprising move to extend furlough to the end of September gave us an indication that it may not be ‘business as usual’ by the start of the summer, without restriction on sector.

He also acknowledged the debt from the extra £407bn spent on support measures would be with us for many years (and governments) to come.

Here’s our round-up of today’s announcements and what it means for your business.  Don’t forget you can join us for our Budget Update webinar and Q&A on Friday at 11am.

The Economy

  • Annual growth be 4% this year, followed by 7.3% growth in 2022, then down to roughly 1.7% for three years thereafter.
  • Underlying debt will peak in 2023/24 to an eye watering 97.1% of GDP.
  • Every 1% rise in the cost of borrowing will cost £25bn!
  • Heavy investment in green funding measures, including a new green investment fund of £12bn.
  • A new Freeport to be established in the Solent.

 

Tax changes 

  • Corporation Tax rises – from April 2023, companies making more than £250k profit will pay 25% corporation tax, an increase of 6% from now (profits up to £50k will remain at 19%, with a tapered rise to £250k.
  • Company losses can be carried back three years instead of one (up to £2m).
  • 130% deduction for capital expenditure.
  • Personal tax bands will be frozen until 2026. with personal allowances held at £12,570 and the higher rate tax brack at £50,270.
  • Changes to R&D tax credit repayments.
  • No capital gains tax or pension changes mentioned!

 

Extension to furlough

With the government still paying the wages of more than 4m people under the Job Retention Scheme, the Chancellor confirmed that furlough  will be extended until the end of September.

  • The scheme will continue paying 80% of employees wages until the end of June, up to a maximum of £2,500 per month.
  • In July, employers will have to contribute 10% towards the hours their staff don’t work.  For August and September this contribution will increase to 20%.

 

Self-Employed

Support will also be extended if you are self-employed or a member of a partnership, under the Self-Employment Income Support Scheme (SEISS), broadly in-line with the furlough scheme, but extended to allow new claims for people who started as self employed in the 19/20 tax year.

 

Re-start grants

To help get non-essential retail, leisure and hospitality businesses back up and running from the expected re-opening date of 12 April, the Chancellor announced a package of support:

  • Grants ranging from £6,000 to £18,000 per business
  • Funding distributed directly to businesses by the local authorities from April – replacing the current monthly grant system.
  • The Cultural Recovery Fund will receive an extra £300m to provide help for arts businesses, which are not expected to open again until 17 May.

 

Support for training and apprenticeships

  • SME owners and managers will be offered free MBA-style management training to help boost productivity
  • Grant of £3,000 to employers who take on an apprentice (of any age) under the new ‘flexi-job’ scheme.
  • 50 hours of training and one-to-one mentor support.  In addition, there will be discounts offered for software to boost digital capability.

 

Other measures

  • Mortgage guarantee scheme, to help buyers with a 5% deposit
  • Stamp Duty holiday extended for another six months
  • £300m recovery package for professional and grassroots sport
  • Fast-track visa scheme to help source overseas talent – specifically for start-ups and rapidly growing tech firms.
  • Business rates holiday to continue for 3 months with reductions for the remainder of the year for Hospitality and continued reduction of VAT rates in that sector.
  • The Covid vaccination rollout will receive an extra £1.65bn, to enable every UK adult to have had a first dose of the vaccine by 31 July 2021.

 

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