When Chancellor Rishi Sunak stood at the despatch box to deliver the Budget for 2021 it was clear there would be some bold policies included in his financial plan. In this article we summarise, in bullet points, what he revealed about the current state of the economy, which of the support measures he is planning to extend, what cuts he is going to make and how it will affect you.
What shape is the economy in?
- The UK economy shrank by 10% this year and isn't expected to return to pre-Covid levels until the middle of 2022
- Unemployment is set to peak at 6.5% next year. So far an estimated 700,000 people have lost their jobs since the start of the pandemic
- Borrowing for this financial year will be £355bn, with a further £234bn in the 2021/22 financial year
- The Chancellor says it will be "the work of many governments over many decades" to pay back the debt and that it is imperative to reduce borrowing in the coming years
How is the government planning to restart the economy?
- A further £1.6bn is being invested in continuing the rollout of the vaccine and to fund future research
- Reopening grants for non-essential businesses will offer up to £6,000 for each premises
- The new recovery loan scheme offers loans to businesses for £25,000 to £10m, with the government providing lenders with an 80% guarantee
- Pubs, restaurants and non-essential retail will see the business rate holiday extended for a further three months, after which time there will be a further six months of rates being cut to two-thirds, up to a maximum of £2m for businesses that have stayed closed
- A new UK Infrastructure Bank is being set up, seeded with £12bn to invest in £40bn worth of projects
What support is the government giving to individuals?
- The furlough scheme is being extended until the end of September, with the government paying 80% of wages for hours people can't work. Employers will have to contribute 10% towards the scheme in July and 20% in August and September
- The £20 temporary rise in Universal Credit is to be extended for a further six months
- Those receiving Working Tax Credit will receive a one-off £500 payment
- The National Living Wage will increase to £8.91 per hour from April
- Duty on fuel, as well as spirits, wine, beer and cider will be frozen for the second year running
What does the Budget mean for business owners?
- Corporation tax is set to rise to 25% in April 2023. A small-profits rate for companies with profits of £50,000 or less will remain at 19%, with a sliding scale up to companies with profits over £250,000, who will have to pay the full 25%
- A tax break on business investment will allow companies to deduct 130% of the cost of their investment from their tax bill
- Companies will be offered a £3,000 incentive to take on apprentices
- A scheme aimed at helping small businesses offers management training which is 90% funded by the government
- There is free online technology advice for small businesses and 50% discount on productivity software, up to £5,000
What does the Budget mean for the self-employed?
- Support for the self-employed has been extended in line with the furlough scheme. A fourth grant will be available in May, with a fifth and final grant in September
- If your turnover fell by 30% or more, you can claim the full 80% grant. If it fell by less than 30%, you can claim a 30% grant
- Even if you didn't qualify for previous grants, if you filed your 2019/20 tax return before midnight on March 2, you will be able to claim the fourth and fifth grants
What does the Budget mean for workers?
- As above, the furlough scheme has been extended until the end of September - with 80% of wages covered for hours you are unable to work
- The National Living Wage will be increased to £8.91
- There is no change to income tax and national insurance rates
- The personal income tax allowance and higher-rate threshold have been frozen until 2026
What does the Budget mean for homebuyers?
- A new mortgage guarantee scheme is designed to incentivise lenders to offer 95% LTV mortgages
- The Stamp Duty holiday has been extended until 30th June. To avoid it then falling off a cliff, it is then being tapered, with the amount covered falling to £250,000 until the end of September