08 Mar
Budget Summary 2021: Key Points You Need To Know
Estimated reading time: 7 minutes
Chancellor Rishi Sunak has revealed the Budget 2021 in the House of Commons on 3rd March 2021. He announced the latest measures in accordance with the government’s tax and spending plans for the year 2021-2022. He also unveiled the government’s plan to continue supporting businesses and individuals who are impacted due to the pandemic, which he hopes to positively impact the UK’s jobs and unemployment rate. Moreover, a series of tax plans were also communicated in the speech; these plans will help in rebalancing the public finances.
Following our tradition to supply our clients with the most recent and accurate information, our accounting and tax specialists have highlighted the key points from the budget 2021 in the following budget summary.
The state of the current UK Economy
To start the budget summary, lets have a look on what Rishi Sunak had to say about the state of the current UK Economy.
- Rishi Sunak assured that the UK economy will recover more quickly than previously expected as the economy is expected to return to its original state by the middle of the next year that is six months earlier than estimated.
- However, the economy will still be 3% smaller in the next five years than it otherwise would have been if not affected by the Pandemic.
- The GDP will grow by 4% this year followed by a rise of 7.3% in the next year.
Taxes
- There have been no changes in the tax rates of National Insurance, Income Tax, or VAT.
- The government has also announced that the tax-free personal allowance is to be frozen at £12,570 from April 2021 until 2026.
- The higher tax rate band is to be frozen at £50,270 for the same period.
- Corporation tax will be increased from 19% to 25% in April 2023; however, it was assured that only profit-making companies (above £250,000) would be impacted. The rates will be kept the same for Smaller companies making profits of less than £50,000
- The stamp duty holiday is extended to 30 June 2021 on house purchases in the UK and Northern Ireland.
- Sales of less than £500,000 will not be charged any tax.
- Capital gains tax exemptions, pensions lifetime allowances, and Inheritance tax threshold will be frozen at the levels of 2020-2021 until 2025-2026
CoronaVirus Support
- The furlough scheme will be extended until the end of September 2021, as announced previously.
- The government will support by paying 80% of wages to employees for hours they cannot work.
- Employers will contribute 10% of these wages in July, rising to 20% in August and September as the furlough scheme gradually phases out.
- The Self-Employed Income Support Scheme has also been extended till September; moreover, 60,000 self-employed people will be able to access the grant.
- People claiming Working Tax Credit will get a £500 one-off payment.
- The government has also unveiled the increase in the minimum wage to £8.91 an hour, applicable from April.
- The £20 a week uplift in the Universal Credit will be extended to another six months.
Video: Budget Summary 2021
Business and Science
- New opportunities for businesses to unlock £20bn worth of investments.
- Firms can utilise the tax-breaks by deducting investment costs from tax bills and reducing taxable profits by 130%. However, it is advisable to consult a professional tax accountant for further implications.
- Incentives to take on apprentices to be increased to £3,000 as the government allocated £126m for traineeships.
- A lower VAT rate for hospitality businesses to be retained at 5% until September, followed by an interim 12.5% rate for a further six months.
- 750,000 eligible businesses in the leisure, retail, and hospitality sectors in England will be able to benefit from business rates relief.
- Businesses and other shops forced to close because of the pandemic will get access to £5bn as restart grants along with a one-off cash grant for the hospitality, leisure, accommodation, gym, and personal care businesses (up to £180,000).
- New visa scheme to recruit highly skilled migrants to help start-ups and rapidly growing tech firms.
- Contactless payment limit to rise to £100 as part of the spring budget.
- Businesses will be able to carry back trading losses temporarily for three years.
Education and Health
- Additional £1.65 billion in cash support to ensure the Covid-19 vaccination roll-out in England is successful.
- New funding of £40m along with lifetime support for the victims of the Thalidomide scandal
- A £19m fund to help and support victims of domestic abuse.
- £10m to support veterans with mental health needs across the UK.
Housing, Infrastructure, and Environment
- A new infrastructure bank was announced by Mr. Sunak.
- The bank will be set up in Leeds with a capital of £12bn.
- It will aim to fund £40bn worth of public and private projects.
- £15bn in green bond to support green projects.
Arts and Sports
- Approximately £400m to support art venues across the UK, along with £90m to support government-sponsored national museums to re-open.
- £300m recovery package for major spectator sports, governing bodies, and supporting clubs in England.
- £25m for grassroots football, and £1.2m for Women’s Euros football tournament that has been delayed previously.
Regions
- The UK government will continue the support for individuals and businesses operating in Wales, Scotland, and Northern Ireland.
- To provide support, devolved administrations have received Barnett funding of an additional £2.4bn for the year 2021-22.
- This means additional support of £1.2bn for the Scottish government, while the Northern Ireland Executive and Welsh government will receive the support of £410m and £740m, respectively.
- Moreover, the devolved administrations will receive an extra 1.4bn of funding outside the Barnett formula.
- £4.8 million will be allocated for the development program of a demonstration hydrogen hub in Holyhead, Anglesey.
Investment Led Recovery
Rishi Sunak emphasized the ‘investment-led recovery’ to plan ahead of time and plan beyond the pandemic. According to him, the budget will carry out new opportunities for businesses to grow in difficult times while aiding from different business support grants.
- At the beginning of April 2021, Companies will benefit from a new super-deduction, cutting their tax bill by 25p per pound invested in new equipment.
- Investments worth £375m for highly innovative companies working on Life sciences, cleantech, or quantum computing sectors through ‘Future Fund: Breakthrough’.
- The new UK-wide Help to Grow scheme will benefit up to 130,000 SMEs by providing tools needed for post-pandemic business recovery, innovation, and management.
- The government of the UK is also about to launch a review of R&D tax relief to maintain the status of the UK as a competitive research and development hub.
- The infrastructure bank to be set up in Leeds will aim for regional economic growth and climate change by investing in local and private sector projects.
Conclusion
The announcements made in the Budget 2021 were mostly anticipated as there were many pre-trailed elements like an extension of Furlough and Self-employment Income Support Scheme. Moreover, the budget does coincide with the government’s plans to maximize economic growth by investing in infrastructure, innovation, and skills. It is to be noted that this is just a mere budget summary highlighting the crucial announcements, hence, not a complete professional guide on how your business will be impacted. It is advisable to consult professional accountants to understand the income tax, corporate tax, and other liabilities.
Anam has a degree in accounting from the Prestigious St John’s University, and works as a senior director in Clear House.
Before working in Clear House, Anam worked in various commercial roles, the last one being the VP Operations for a prestigious business organisation,working on improving the organisation’s operational efficiency, growth and high level client management.
Anam manages clients ranging from software companies to large property developers and managers. Notably, she recently worked with a large property development company building large scale developments in London and the surrounding area.