Budget 2021: COVID highlights
Michael Westcott, Trainee Solicitor, listened in as the Budget unfolded and identified the COVID related highlights.
The Budget was delivered by the Chancellor on 3 March 2021. This was always going to be a slightly different type of Budget due to the pandemic. Michael Westcott, Trainee Solicitor, listened as the Budget unfolded. Below are the COVID related highlights.
The UK economy
The Office for Budget Responsibility have predicted that the economy will recover to its pre-COVID level by the middle of 2022. However, it is also predicted that the economy will still be 3% smaller than it ordinarily would have been in five years’ time but for COVID.
The Furlough Scheme is to be extended to the end of September 2021. Employees will continue to receive 80% of their salary for hours not worked until the scheme ends. However, businesses will now be asked to contribute. The Furlough Scheme will continue as is until July 2021 when, at that stage, the employer contribution will increase to 10%, with a further increase in August to 20%.
Self-employed Furlough Scheme
This Scheme will continue until September 2021, with a fourth grant covering February to April and a fifth and final grant for May onwards. The fourth grant will cover 80% of average trading profit. For the fifth grant, individuals will continue to receive the full 80% grant if their turnover has fallen by 30% or more. Those that have not seen a 30% or more reduction in turnover will be eligible for a grant of 30% only.
When the scheme was originally launched those that had recently become self-employed had been unable to receive grants as they had not been able to file the 2019-20 tax return. However, these individuals will now be eligible for the fourth and fifth grants if they have filed their tax returns before midnight on 2 March 2021.
Low income households
There will be a £20.00 per week universal uplift to be extended for six months. Working tax credit claimants will receive equivalent support for the next six months by way of a one off payment of £500.
‘Direct Cash Grants’ will be replaced win April 2021 with ‘Restart Grants’ for non-essential retail businesses who will be eligible for up to £6,000 per premises. Hospitality and leisure businesses (including personal care and gyms), which will experience a longer duration of restrictions than non-essential retailers, will be eligible for restart grants of up to £18,000.
Recovery loan scheme
‘Bounce back Loans’ are to be replaced by ‘Recovery Loans’. Businesses of any size can apply for a loan between £25,000 to £10 million before the end of 2021. The Government will provide a guarantee to lenders of 80%.
100% Business Rates holiday will continue until June 2021 (the holiday had been open to eligible businesses in the hospitality, retail and leisure sectors in England). From July 2021 to March 2022 the reduction will be two thirds up to a value of £2 million for closed businesses, with a lower cap for those businesses that were able to stay open.
The 5% reduced rate of VAT will be extended to 30 September 2021 for hospitality and tourism businesses. Thereafter, it will increase to 12.5% for six months and then return to standard rate in April 2022.
Nil rate stamp duty remains in place on homes up to £500,000 until 30 June 2021. Thereafter it will be reduced to £250,000 until the end of September 2021. From October 2021 it will return to £125,000.
Lenders who provide mortgages to buyers who can only provide a maximum of a 5% deposit will benefit from a government guarantee on those mortgages.
- There will be no increase to Income Tax, National Insurance or VAT. There will be a freeze on personal tax thresholds this financial year. There will be an increase to £12,570 next year but this will remain at that level until 2026.
- The higher rate tax threshold will also freeze, only increasing next year to £50,270 and will remain at that level until 2026.
- IHT thresholds, Pensions Lifetime Allowance and CGT annual exempt amount will all be maintained at current levels until 2026.
- The VAT registration threshold will be maintained at £85,000 for two years from April 2022.
- Corporation tax is to increase to 25% in April 2023.
- Small businesses with £50,000 or less in profits will pay 19% corporation tax. A taper between £50,000 and £250,000 will be introduced.
- Tax treatment of losses to carry back up to £2 million for up to three years.
- The bank 8% surcharge is to be reviewed.