Budget 2021: summary

A summary of the Budget which the Chancellor unveiled in the House of Commons this afternoon.

In what he said was a three-part Budget, the Chancellor unveiled measures which he said were designed to provide continued support to businesses and individuals through the remainder of the coronavirus crisis; stimulate an economic recovery as businesses begin to reopen; and begin to normalise Britain’s finances.

The most significant measures for our sector announced today include:

• The VAT cut for hospitality, tourism and leisure has been extended until 30 September 2021, followed by an interim rate of 12.5% until 31 March 2022, when it will return to the standard rate.
• The Government has launched a new Recovery Loan Scheme to replace CBILS, BBLS and other business support schemes from April 2021 until 31 December 2021, subject to review. Businesses of any size can apply for 80% government-backed loans of between £25,001 and £10 million from a set of accredited lenders.
• A new £5 billion Restart Grants scheme will provide a one off payment of up to £18,000 per premises to business which have been closed as the economy begins to reopen.
• The 100% cut in business rates will continue until 30 June 2021. After this businesses that have been closed for business will be able to claim a two thirds cut in rates (up to £2 million), with a lower threshold for those who have been able to remain open.
• Small and medium-sized employers will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay costs per employee from the government.

Please see a full summary of measures that were included in the Budget, and a short analysis below.

The full Budget can be viewed here.

To view the NFFF Budget 2021 – Statement click here

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The Chancellor Rishi Sunak delivered his second Budget this afternoon. After a year in which he has been forced to make repeated interventions on the UK’s economic response to the crisis, the Chancellor will hope that this is his final intervention on COVID support measures.

The statement set out a further comprehensive package of measures to support households and businesses over coming months, whilst also looking more long term. The latest OBR forecasts published alongside the Budget show optimism that the UK economy will return to pre COVID levels by the middle of next 2022, thanks to the progress of the vaccine rollout. But highlight the continued scale of the challenge the UK jobs market faces, with unemployment set to peak at 6.5% by the end of 2021.

The Chancellor set out three principles to his approach:

1. Continue to do whatever it takes while the crisis continues
2. Begin to fix the public finances once we’re on the road to recovery 
3. Start work to build our economy of the future

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DETAILED OVERVIEW OF KEY ANNOUNCEMENTS

Coronavirus support (jobs/wages)

• Furlough scheme will be extended to the end of September. Workers will continue to receive 80% of their hours not worked. Businesses must contribute 10% of the cost in July, then 20% in August and September.
• Support for the self-employed will be extended. A 4^th self-employed support grant will be available from February to April at 80% of trading profits. A 5^th grant will be available from May onwards, and for those whose turnover has fallen 30% or more will receive grants totalling 80% of lost income capped at £7,500, while people whose turnover has fallen less than 30% will receive a grant equivalent to 30% of lost income, capped at £2,850. Provided they have filed a tax return marking themselves as self-employed by the tax return deadline at midnight last night, 600,000 further people will become eligible for accessing these grants.
• The Universal Credit uplift of £20 pw will continue for a further six months. Working tax credit claimants will be provided with a one-off payment of £500.
• The National Living Wage will be increased to £8.91 from April.

Coronavirus support (business)

• A new Recovery Loan Scheme will replace CBILS, BBLS and other business support schemes from April 2021 until 31 December 2021, subject to review. Businesses of any size can apply for 80% government-backed loans of between £25 thousand and £10 million from a set of accredited lenders, to be confirmed in due course. The loans will be made up of term loans and overdrafts between £25,001 and £10 million per business, and invoice and asset finance between £1,000 and £10 million per business. No personal guarantees are needed on loans up to £250,000. Business must be viable or deemed to be viable were “it not for the pandemic”.
• A new £5 billion Restart Grants scheme will provide a one off payment of up to £6,000 per premises to non-essential business. Hospitality and leisure businesses can claim up to £18,000, reflecting the larger impact of prolonged restrictions that are in place.
• The 100% cut in business rates will continue until 30 June 2021. After this businesses that have been closed for business will be able to claim a two thirds cut in rates (up to £2 million), with a lower threshold for those who have been able to remain open.
• Hospitality and tourism businesses will continue to benefit from a 5% cut in VAT until 30 September 2021, followed by an interim rate of 12.5% until 31 March 2022, when it will return to the standard rate.
• Small and medium-sized employers will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay costs per employee from the government.

Business tax changes

• In April 2023, the top rate of corporation tax will increase to 25%. Any struggling business will be unaffected due to the definition of the tax. Small businesses with profits of £50,000 or less will pay a small profits rate, maintained at the current rate of 19%. This means 70% of companies (1.5 million) will be unaffected. There will be a taper above £50,000 so only companies with profits of £250,000 or higher will be taxed at the highest rate – only 10% of companies will pay this. The government believes that that combined level of corporate and bank taxation would be too high and will therefore review the bank surcharge in the autumn.
• Any business that took advantage of the original VAT deferral on returns from 20 March through to the end of June 2020 can now opt to use the VAT Deferral New Payment Scheme to pay that deferred VAT in up to eleven equal payments from March 2021, rather than one larger payment due by 31 March 2021, as originally announced.
• Businesses can carry back tax losses of up to £2 million for up to 3 years, aiding cashflow benefits. Businesses can claim tax refunds of £760,000.
• For the next two years, companies investing in qualifying new plant and machinery assets can reduce their tax bill with a “super-deduction”, lowering their tax bill by 130% of the cost. The super-deduction will also cut companies’ tax bills by 25p for every pound they invest in new equipment. Investing companies will benefit from a 50% first-year allowance for qualifying special rate assets.
• The planned increase on alcohol duties will be cancelled.
• The Government launched areview of R&D tax reliefs, seeking views on the nature of private-sector R&D investment in the UK, how that is supported or otherwise influenced by R&D relief schemes, and where changes may be appropriate. The deadline for submissions is 2 June 2021.
• In a separate response, the Government has also said that it will consider bringing data and cloud computing costs into the scope of relief alongside a number of other policy options and priorities at the wider review.
• The Government also launched a review of the Enterprise Management Incentives (EMI) scheme, seeking views on whether and how the scheme should be extended.

Personal tax changes

• Personal tax thresholds will be frozen as the government announced it is not going to raise the rates of income tax, national insurance or VAT. The income tax threshold will increase to £12,570 and the higher rate threshold will rise to £50,270 next year, but they will be kept at this level until 2026.
• The Chancellor also stated that inheritance tax thresholds, pensions lifetime allowance and the annual exempt amount in capital gains tax will be maintained at their current levels until April 2026, and the VAT registration threshold will be maintained for two years from April 2022.
• The stamp duty holiday on properties worth up to £500,000 will also be extended until the end of June for properties worth up to £500,000, and until to end of September for properties under £250,000 before returning to normal on 1 October 2021.

Environmental measures

• National Infrastructure Bank: based in Leeds, the National Infrastructure Bank will invest in public and private projects to finance the green industrial revolution. Beginning this spring, the it will have an initial capitalisation of £12 billion, with potential for £40 billion of total investment
• Offshore Wind: the Chancellor emphasised the innovation and the competitiveness of the UK offshore wind industry, saying it already has a global advantage.
• Green Bonds: the Government will issue its first sovereign green bond – or green gilt – this summer, with a further issuance to follow later in 2021 as the UK looks to build out a ‘green curve’. The green gilt framework will be published in June and will detail the types of expenditures that will be financed to help meet the government’s green objectives.
• Monetary Policy: the Chancellor highlighted that the description of the government’s economic policy within the Bank of England’s Monetary Policy Committee has been updated to reflect the importance of environmental sustainability and the transition to net zero.
• Green Retail National Savings and Investment (NS&I) product: the government will offer a green retail savings product through NS&I in the summer of 2021. This product will be closely linked to the UK’s sovereign green bond framework and will give all UK savers the opportunity to take part in the collective effort to tackle climate change, benefiting from the innovative reporting standards planned for the green gilt programme
• Energy innovation: though not referred to in Sunak’s parliamentary statement, the budget document highlights changes in spend on energy innovation and high-tech projects, including:
  • the launch of a £20 million programme to support the development of floating offshore wind technology across the UK
  • the launch of a new £68 million UK-wide competition to implement several first-of-a-kind energy storage prototypes or technology demonstrators
  • a £4 million UK-wide competition for the first phase of a biomass feedstocks programme, to support the rural economy in making improvements to the production of green energy crops and forestry products

Infrastructure and levelling up

• Sunak announced the eight locations that would be given freeport status (East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Teesside, Solent, and Thames) to encourage investment, construction and job creation in each location.
• He also announced a number of initiatives to help make the UK a leader in technology and innovation, including £4.8m to support the development of a hydrogen hub in Holyhead and £30m in matched funding for a Global Centre for Rail Excellence in Wales.
• The Chancellor also spoke of the role every nation and region of the UK has played in the response to the pandemic, and that the Government’s response would reflect this by backing projects across the UK, including:
  • An acceleration of investment in six city and growth deals in Scotland (Ayrshire, Falkirk, and Argyll and Bute) and Wales (Swansea Bay, North-Wales and Mid-Wales).
  • Establishing a new Treasury North campus in Darlington.
  • Making over £1 billion available from the Towns Fund for a further 45 Town Deals across England, to help them level up and implement a growth strategy.
  • Launching the prospectus for the £4.8 billion Levelling Up Fund.

Skills

• The Chancellor that employers who hire a new apprentice between April and September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire under the previous scheme.
• There will be an additional £126 million in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year.
• A Help to Grow scheme has been launched today to support 130,000 SMEs with the tools they need to become more productive through access to management training and free advice on how to improve digital capabilities, with vouchers to buy approved software.
• The Government will introduce a £7 million fund from July 2021 to help employers in England set up and expand portable apprenticeships.
• The Chancellor announced the Government will invest £1.3 million over 2021-22 and 2022-23 to pilot the use of new technologies to support in or out-of-work people to find new job opportunities.