Reports: A summary of the 2021 budget announcements
Earlier today Chancellor Rishi Sunak delivered potentially the most important budget we’ve seen in decades.
Unsurprisingly the focus of today’s announcements was on economic recovery in the wake of the Coronavirus pandemic, with Sunak unveiling a three-part plan to ‘protect the jobs and livelihoods of the British people’:
- do whatever it takes
- when we’re on the way to recovery, fix public finances
- begin building the future of our economy
Below is an overview of the key announcements. Look out for our in-depth analysis over the coming days and leave your details below to receive it straight to your inbox when published!
According to the Chancellors statement, economic forecasts from the Office from Budget Responsibility show that the government’s Covid response is working.
2021 growth is expected to be 4%, with the UK economy on track to return to pre-pandemic levels by the middle of next year – six months earlier than first thought.
However, long-term impacts of the pandemic will be felt, with the OBR predicting we’ll be around 3% behind where we thought we would be in five years’ time.
Although reaching 6.5%, there are thought to be 1.8 million fewer people out of work than first predicted.
In order to keep those levels down, he announced several employment support measures, as follows:
- The furlough/Coronavirus Job Support Scheme will be extended to the end of September 2021. For employees there will be no change – they will continue to receive 80% of their salary for hours not worked.
As businesses open, they will be asked to contribute 10% in July, then 20% in August and September
- Support for the self-employed will continue to September, with 4th and 5th grants planned.
Crucially, the newly self-employed will now have access to these grants provided they filed a tax return by midnight last night. It’s thought around 600,000 more people will now qualify
- The Universal Credit £20 a week uplift will continue beyond lockdown for a further 6 months, the Northern Ireland Executive receiving additional funding to match the increase
- Working Tax Credit claimants will also be given more support for the next six months, with a one-off payment of £500
- The national living wage will be increased to £8.91 from April
- To get more people into jobs, businesses will be given incentive payments of £3,000 for all new apprenticeship hires; there will be a £7m new flexi-job apprenticeship programme enabling apprentices to work with a number of employers in one sector, and an additional £126m will be made available to support 40,000 more traineeships for 16 – 24-year-olds across England
With lockdown extended into 2021 and many businesses still not able to fully open, Sunak recognised the need to provide extra recovery support over the coming months.
- A new UK-wide Recovery Loan Scheme will provide loans of between £25,000 and £10m, guaranteed up to 80% by the government
- £5bn worth of restart grants was announced, with up to £6,000 available to those allowed to reopen in April, and up to £18,000 for those not able to open until later – for example across hospitality, leisure, personal care and gyms
- £700m will be made available to support the re-opening of arts, culture and sporting institutions as they re-open, and the Film and TV Production Restart scheme will be extended and given an additional £300m to support theatres, museums and other cultural organisations through the Culture Recovery Fund
- £90m will also be made available for government-sponsored national museums in England, and £300m to support clubs and government bodies of major spectator sports as fans behind to return
- A £150 million Community Ownership Fund will allow communities across the UK to invest in local pubs, theatres, shops, or sports clubs
- SMEs will continue to be able to reclaim up to two weeks’ worth of Statutory Sick Pay per employee from the Government
- The hospitality 5% VAT rate has been extended to the end of September, after which it will be replaced by a 12.5% rate until 31 March 2022
- There will be a 100% business rates holiday to the end of June; after which rates will be discounted up to two thirds – meaning a £6bn tax cut for businesses
- The VAT registration threshold will be kept to £85,000 for the next two years
- In 2023, the rate of corporation tax paid on company profits will increase up to 25%; it will still be the lowest rate in the G7.Small businesses will be protected, with a new small profits rate created at the current 19% for companies with profits up to £50,000. This means around 70% of actively trading companies will therefore be unaffected by the corporation tax increase.
Above £50,000, only businesses with profits of £250,000 or greater will be taxed at the full 25%
- The tax treatment of losses will be more generous, allowing more businesses to carry back losses of up to £2m for up to three years, meaning additional tax refunds of up to £760,000
Sunak announced a considerable amount of investment aligned with the industrial strategy grand challenges, clearly seeing recovery being led by investment in new and green technologies as critical.
Significantly, a new ‘super-deduction’ will allow companies investing in new equipment to reduce their tax bills by 130 percent of the cost.
This will be worth around £25bn to UK companies over the two-year period in which the super-deduction will be in effect.
With ambitions to make the UK the best place in the world for high-growth, innovative companies Sunak announced two consultations to make sure our research and development tax relief and enterprise management incentives are internationally competitive.
Large investment in green technology forms part of Sunak’s investment-led recovery plan, with several new funds and competitions announced:
- £375 million will be available for innovation in life sciences, quantum computing and clean tech through the ‘Future Fund: Breakthrough’
- £68 million competition to deliver first-of-a-kind long-duration energy storage prototypes that will reduce the cost of net zero by storing excess low carbon energy over longer periods
- £4 million for a biomass feedstocks programme in the UK to identify ways to increase the production of green energy crops and forest products that can be used for energy
- £20 million to fund a UK-wide competition to develop floating offshore wind demonstrators and help support the government’s aim to generate enough electricity from offshore wind to power every home by 2030
To further support innovation through access to skills, a new unsponsored points-based Visa to attract the best, most promising international STEM talent will launch, and a new Help to Grow scheme will support up to 130,000 companies with digital and management training.
Regional investment will increase and continue, with Towns Funds provided to 45 towns to support long-term economic regeneration and recovery; local cultural projects receiving £18.8m in Hartlepool, Carlisle, Wakefield and Yeovil; and eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
- Income tax, national insurance and VAT will not be raised, but the income tax threshold will increase to £12,570. This will be kept at this level to 2026 removing the incremental benefits created had thresholds continue to increase with inflation
- Inheritance tax, pensions lifetime allowance and the annual exempt amount in capital gains tax will also be fixed to 2026
- Planned alcohol and fuel duty increases will not go ahead in order to assist hospitality and the cost of living
Health and crime
- An extra £19m will be available for domestic violence programmes in recognition of the part lockdown has played in exacerbating this type of crime
- £100 million for a new Taxpayer Protection Taskforce to crack-down on COVID fraudsters who have exploited UK Government support schemes
- £10 million to support veterans with mental health needs across the UK
- An extra £1.65 billion cash injection to ensure the Covid-19 vaccination roll-out in England continues to be a success