How does the 2021 Budget Announcement affect you?Andrew Smith
The Budget Announcement is invariably met with mixed sentiment, but this year the Chancellor’s declaration of planned public expenditure felt different; more tense – and for the many businesses caught up in what Rishi Sunak referred to as the “acute” damage to the UK economy caused by Covid-19, potentially critical for survival.
On the whole, the 3 March Budget, including an additional £65bn of interventions in addition to extensions of existing measures created to soothe the damaging effects of pandemic-driven lockdowns, goes some way to paving a more prosperous path for Real Estate in the year ahead.
To keep you well informed of the latest announcements, changes and support measures that affect you, we have compiled a brief blog containing the following highlights of the 2021 Budget:
- VAT Reduction Extension
- New “Re-start Grant”
- Furlough Scheme Extension
- Self-employment Income Support Scheme
- Business Rates Relief Extension
- Business Recovery Loan Scheme
- National Living Wage Increased
- Universal Credit Payments Extended
- Corporation Tax Increase to 25% in 2023
- “Super Deduction” to Boost investment
- Income Tax Thresholds Frozen
- Stamp Duty Holiday Extension
- New Tech Visas
VAT Reduction Extension
The 5% reduced rate of VAT for the hospitality and tourism sectors will be extended to 30 September 2021. Once the relief is withdrawn, a process of tapering will be applied with an interim VAT rate of 12.5% applying for a six-month period, returning to the full 20% standard rate in April 2022.
To further help the hospitality industry, the Treasury appears to have responded to lobbying groups (particularly from the pub sector) by cancelling planned increases in duties on alcohol. The result is a duty freeze on alcohol for two consecutive years.
A New “Re-start Grant”
A new “Re-start Grant” will be made available from April 2021 to assist businesses with the process of reopening. Non-essential businesses, scheduled to re-open on 12 April 2021, will receive a grant of £6,000 per premises.
Hospitality and leisure (including personal care and gyms) will be allowed to re-open at a later date and will therefore be subject to a longer period of restriction. As a result, those businesses will receive up to £18,000. According to Mr Sunak, this amounts to £5bn of new grants and direct total cash support to business of £25bn.
A fund of £700m will also be made available to “support arts, culture and sport” and a pot of £150m will also be made available to help communities to take ownership of pubs and theatres.
Furlough Scheme Extension
The furlough scheme – known as the Coronavirus Job Retention Scheme – will be extended to the end of September across the UK. Employees on furlough will continue to get 80% of their salary for hours not worked, up to £2,500 per month. That will remain the case until the scheme ends.
From July employers will be asked to contribute more, with the state only contributing 70%, of pay and employers expected to pay the remaining 10%. In August and September, the state will pay 60% and employers will have to pay 20%.
Wider Eligibility for Self-employment Income Support Scheme
The Self-employment Income Support Scheme (SEISS) has been extended for a fifth grant, covering June, July and August. But the fifth grant will be more targeted:
- those whose turnover has fallen more than 30 per cent will still be eligible for 80 per cent of average monthly profits (up to £7,500)
- those who haven’t been as affected will be eligible for a grant worth 30 per cent of average monthly profits
However, while eligibility for SEISS has been widened, there’s still no support for the estimated three million self-employed people left behind by the government response so far. These include freelancers, limited company directors, and the self-employed with more than £50,000 in trading profits.
Business Rates Relief Extension
Another £6bn of business rates relief will be provided, with relief lasting for the whole of 2021-2022, albeit at a two-thirds discount (up to £2m for closed businesses) from July. After that, the relief is better-targeted than previously, being capped per business rather than per property. However, the Chancellor has announced no additional relief or support within rates from 1 April 2022.
Business Recovery Loan Scheme
The Recovery Loan Scheme, opening on 6 April, will take the place of the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme.
UK businesses of any size can apply for a loan or overdraft between £25,000 and £10m until the end of 2021. Asset and invoice finance between £1,000 and £10m will also be available. All will have a Government guarantee of 80 per cent.
Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance, terms will be up to three years. No personal guarantees will be taken on facilities up to £250,000 and, as before, a borrower’s principal private residence cannot be taken as security.
National Living Wage Increased
The national living wage will be raised from April. It will go up to £8.91 from its maximum current level of £8.72 an hour. The Chancellor did not reveal which age groups would benefit from the change, but the existing £8.72 total is paid to those aged 25 and over.
Universal Credit Payments Extended
The temporary boost in Universal Credit payments, first implemented last year, was extended by six months. The support, worth £1,040 a year, was initially only supposed to last a year, until March 31. Instead, claimants will now continue to get the extra cash until October 2021.
Corporation Tax Increase to 25% in 2023
Corporation tax rates will be tiered for the first time with firms making an annual profit of £50,000 or less continuing to pay the current 19% rate. Rates will then be tapered up to £250,000 profits when companies will pay the new 25% rate from 2023. Sunak said only 10% of firms would pay the new higher rates
“Super Deduction” to Boost Investment
The Treasury hopes to raise £40bn over the next two years by encouraging a boom in business investment with a new “super deduction” tax incentive. This measure will allow a temporary first year allowance; including a super-deduction of 130% on most new plant and machinery investments which would have ordinarily qualified for 18% relief, and a first-year allowance of 50% on most new plant and machinery investments which would have ordinarily qualified for 6% relief.
Income Tax Thresholds Frozen
The income tax personal allowance and higher rate threshold will be uprated in line with CPI as planned in April 2021, then maintained at that level until April 2026. This decision will not reduce take-home pay and the highest income households will continue to contribute more. This will take effect in April 2022.
Stamp Duty Holiday Extension
The property purchase tax has been suspended on the first £500,000 of all sales in England and Northern Ireland since July. The tax break will now continue until the end of June. After that the nil rate band will be set at £250,000 – double its standard level – until the end of September.
New Tech Visas
With its stated aim of helping the UK “attract and retain the most highly skilled, globally mobile talent” in science and technology, yesterday’s budget included a pledge to introduce by March 2022 a visa containing a “scale-up” stream. This will enable people with a job offer from a recognised UK scale-up to qualify for a fast-track visa.