The 2021 Budget was widely touted as package that would see COVID-19 support extended for businesses and individuals – but which might have a sting in the tail with a significant increase in Corporation Tax.
So how did the 2021 Budget shape up?
The Chancellor began by affirming that the government has done ‘whatever it takes’ during the pandemic, and that it will continue to do so. However, he added that 700,000 people have lost their jobs, the economy has shrunk by 10% and borrowing is at its highest outside wartime.
As a result, the Chancellor said he had developed a 3-part plan to navigate the country out of the crisis and beyond. These three parts were to:
- continue doing whatever it takes to help businesses and individuals
- fix the public finances as the country is on its way to recovery
- begin building the future economy.
So, what where the key announcements under each part of the 2021 Budget’s 3-part plan?
Help for businesses and individuals
- The furlough scheme has been extended until the end of September. It will continue to cover 80% of salary. However, in July, employers will be expected to contribute 10%. In August and September they will need to contribute 20%.
- The Self-Employment Income Support Scheme will also continue until September. The 4th grant will cover February to April and will be set at 80% of average trading profits. A fifth grant will be available from July. People whose turnover has dropped by 30% or more will continue to get the 80% grant. Those whose turnover has dropped by less than 30% will get a 30% grant.
- The Universal Credit uplift of £20 per week will continue for another 6 months.
- The National Living Wage will increase to £8.91 from April.
- Businesses will receive £3,000 for each new apprentice hired between 1st April and 30th September 2021.
- £300m will be invested to extend the Culture Recovery Fund, continuing to support key national and local cultural organisations in England. A further £300m will back clubs and governing bodies across a wide range of sports in England.
- A new Restart Grant will begin in April to help businesses reopen. Non-essential businesses will get grants of up to £6k per premises. Hospitality, personal care and similar sectors that won’t be able to open until later on will get grants of up to £18,000
- A new Recovery Loan Scheme will allow businesses to borrow between £25.000 to £10m. Government will guarantee 80% of each loan.
- The business rates holiday for retail, hospitality and leisure firms will continue until the end of June. For the remaining nine months of the tax year, business rates will be discounted by two thirds.
- The temporary reduced VAT rate for hospitality and tourism will remain at 5% until 30th September. This will be followed by an interim rate of 12.5% for 6 months. The standard VAT rate will be re-applied from April next year.
- There will be a tapered extension of the stamp duty holiday. Until 30th June, the nil-rate band will continue at £500,000. From June to September, the nil-rate band will be £250,000.
- A mortgage guarantee scheme will encourage lenders to offer 95% mortgages, making home ownership more accessible to those with a smaller deposit. Mortgages are being offered by some lenders from next month.
Fixing public finances
- Personal tax thresholds will be frozen. Next year the tax-free allowance will rise to £12,570 and the higher rate threshold will rise to £50,270, They will then remain frozen until April 2026. The VAT threshold will reamin frozen at £85,000 until 2024.
- From April 2023 the rate of Corporation Tax will increase from between 19% to 25%. Companies with profits under £50,000 will remain at 19%. Companies with profits between £50,001 and £250,000 will pay a tapered rate. Only those with profits over £250,000 will pay the full 25% rate.
- Firms can carry back losses up to £2m for up to 3 years. This means they can claim additional tax refunds of up to £760,000.
- Super deduction. Through a new 130% super-deduction scheme, companies can cut their taxes by up to 25p for every pound they invest in machinery and equipment. For example, a company that invests £10m in new equipment can reduce its tax bill by £13m.
- Duties on alcohol and fuel remain frozen.
Building the future economy
- A UK Infrastructure Bank will be set up in Leeds with £12bn capitalisation from this Spring.
- The UK will launch the world’s first sovereign green savings bond for retail investors, allowing savers to help drive the country’s transition to net zero by 2050
- The Help to Grow scheme will give the leaders of 30,000 SMEs access to world-class training on everything from financial management to marketing. It will also give small businesses free online technology advice and 50% discounts on new productivity enhancing software.
- Visa reforms. New plans will help attract top level talent from all around the world. Highly skilled migrants. This will be in the form of an unsponsored, points-based visa.
2021 Budget: conclusion
As you can see, there is much positive news for both individuals and businesses in this year’s budget. Even the much-trailed Corporation Tax rise was less painful than anticipated, with 90% of businesses not having to pay the full 25% rate.
We’ll be analysing the announcements in more detail in coming days. In the meantime, the government has published its own Budget summary here. And, as always, if you are a THP client and you have any questions about the 2021 Budget, please get in touch with your account manager.
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.