Chancellor Rishi Sunak made his Budget 2021 speech on 3 March 2021, the highlights of the speech as as follows: 

Highlights

  • Corporation tax will increase to 25% from 2023, very small companies are unaffected.
  • The Stamp Duty Land Tax (SDLT) nil rate break extends until September.
  • Large grants for hospitality industry which also benefits from extended VAT rate reduction.
  • Tax allowances are frozen until 2026.
  • VAT theshold frozen until 2024
  • Business Rates: three months 100% holiday, nine months 66% relief with cap
  • Various coronavirus support measures including new grants.

Much has changed due to the coronavirus: there has been £208 billion of government support during the crisis, £350 billion of support is now being announced, total fiscal support will be £407 billion.

The UK's economy shrunk by 10%, the highest borrowing since wartime (WW2) totalling £355 billion.

The chancellor proposes a three-part plan:

  1. The government will continue to support the economy through Coronavirus.
  2. Once on the road to recovery, the public finances will need fixing
  3. Using lower interest rates to invest in capital projects

The Office of Budget Responsibility (OBR) expects the economy to recover by mid-2022. However, in five years time, the economy will still be 5% smaller than otherwise.

The question is how to balance support with fixing public finances.

To protect jobs during coronavirus

  • Coronavirus Job Retention Scheme CJRS the 'furlough scheme' extends to 30 Septemeber 2021
    • From July onward employers will be asked to contribute more to the scheme on a sliding scale.
  • Self-Employed Income Support Scheme (SEISS).
    • A fourth and fifth grant will be paid this summer.
    • Provided a tax return was filed by 28 Feb, the newly self-employed will be able to claim the fourth and fifth grants.
  • Universal credits and working tax credit support will continue with a one-off WTC payment of £500.
  • NMW increases to £8.91 from April 2021.
  • Increase to £3,000 the employer payment received for new apprentices.

Other support

  • Extra £19m for domestic abuse programmes.
  • £10m to support war veterans' mental health issues.
  • Further £40m support for Thalidomide victims and a lifetime support package.

New business re-start grants

  • Up to £6k for retail and non-essential business
  • Hospitality business will receive grants of up to £25k
  • £700m for organisations such as sports and arts.

  • £500m for film production.

A new recovery loan scheme

  • £25k-£10m, with 80% backed by government guarantee

Business rates

  • A business rate holiday followed by discounted rates

    This year 100% business rates holiday to the end of June. The remaining nine months will be discounted by two-thirds. There is a lower cap for those businesses that have stayed open.

VAT Hospitality and Tourism

  • 5% reduced rate of VAT extended to 30 September 2021, followed by a 12.5% interim rate until April 2021.

Stamp Duty Land Tax

  • The £500k nil rate band will extend to 30 June 2021
  • A £250k nil rate band until 30 September 2021

Homebuyers:

  • 95% mortgages with a government mortgage guarantee. 

Income Tax

Tax personal allowance will increase next year (6/04/21):

  • Lower rate increases to £12,570.
  • Higher rates to £50,270.

The rates will be frozen until 2026 and no longer increase with inflation.

From 2026: 

Other allowances are also frozen:

  • IHT exempt amount unchanged at £325,000
  • Pensions allowances unchanged £40,000 p.a and no change to the lifetime limit.
  • CGT exempt amount.
  • VAT registration threshold remains at £85,000 until 2021.

Corporation Tax

  • From 1 April 2023 Corporation tax will increase to 25% 
  • A small company profit rate (19%) for companies with profits of <£50,000
  • Full higher rate for larger more profitable companies with profits of >£250,000
  • Favourable treatment for UK banks

 Losses

  • Changes to current year loss rules: to be carried back three years

New Super deduction for companies

  • 130% reduction for expenditure on innovation

Duties

  • Alcohol duties frozen
  • Fuel duty frozen

Funding and investment models

  • A new UK infrastructure bank will be capitalised at £12b initially this Spring
  • A new sovereign retail savings product.
  • Off-shore wind – funding new port infrastructure Teeside and Humberside.
  • A new future fund breakthrough to attract companies to list
  • Changes to allow more flexible pension investments

Help to grow

  • A new initiative for small businesses. A UK-wide system, Help to Grow, of business education with up to 90% of the cost to be paid by government.
  • Help to Grow Digital: offering free expert IT training and a 50% discount on business software up to £5,000.

Science and innovation

  • More cash for vaccine rollout.
  • Two new consultations on Research & Development and EIS.
  • Visa reforms to attract highly qualified visa applicants.

 Increased funding for devolved administrations

  • £1.2bn for the Scottish government.
  • £740m for the Welsh government.
  • £410m for the Northern Ireland executive.

A levelling up fund

Freeports

  • Key features: simpler planning, cheaper customs and tax breaks
  • Eight new locations in English regions including East Midlands Airport, Felixstow and Harwich, Plymouth, Thames and Teeside.

Useful guides on this topic

Budget 2021: At a glance
A summary key budget announcements together with items published without announcement.

Budget 2021: Subscriber guide
A detailed guide with links to more detail on all the key topics for SMEs and their owners.


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