TTR Barnes

Chancellor Rishi Sunak has announced his 2021 Budget, which sets out government spending plans for the year ahead. As expected, further support for people affected by the coronavirus pandemic and plans for the UK’s economic recovery as we transition out of lockdown were a central focus. Read on to learn what was included in the 2021 Budget, and what it means for you and your business. 

What was in the 2021 Budget?

The primary focus of the Budget was how the government plans to manage the UK’s economic recovery in the wake of the coronavirus pandemic. According to Sunak, the UK economy shrank by 10% in 2020, with 700,000 people losing their jobs. The economy is expected to return to pre-pandemic levels by mid 2022, with predicted growth of 4% this year and 7.5% next year.

The Budget includes:

• Additional support for people affected by the coronavirus pandemic, including extensions to the furlough and SEISS schemes, as well as new business grants and loans
• Details about tax thresholds, stamp duty and corporation tax
• Funding for the vaccine rollout
• Support for the arts, culture and sport sectors
• Additional incentives for businesses employing apprentices
• Lower VAT rates for hospitality and leisure businesses
• Increase to the National Living Wage
• New “super deduction” tax scheme for businesses which invest
• Announcements about freeport locations, including one in the North East
• Alcohol, tobacco and fuel duties

Coronavirus support

The Budget included several announcements about additional support for businesses and employees affected by the coronavirus pandemic. This included:

• The Job Retention Scheme (furlough) is to be extended until September, however employers will be expected to contribute 10% in July and 20% in August and September
• The SEISS scheme, which supports self-employed people, has also been extended, with fourth and fifth grants announced and newly self-employed people who filed tax returns in 2019/20 now eligible. However, the criteria has changed – you will now need to demonstrate a fall in turnover of at least 30% to get the full amount
• Business rates holidays for companies in England have been extended until June, followed by a 75% discount
• New grants are available for businesses which have been forced to close as a result of the pandemic. This includes:
  • £6,000 grant available per premises to non-essential outlets due to open in April
  • £18,000 grant available to hospitality and leisure businesses (including gyms and personal care services)
• The 5% VAT rate will continue to apply to hospitality businesses until September, followed by an interim 12.5% rate for the following six months
• There is a new £400m package of support to help England’s museums and cultural venues re-open, a £300m recovery package for professional support and £25m for grassroots football, plus £1.2m to support the hosting of the delayed Women’s Euros football tournament which will now take place in 2022

Tax

There were no changes announced to the rates of income tax, national insurance or VAT, however the basic rate tax-free personal allowance will be frozen at £12,570 from April 2021 until 2026, while the higher rate threshold will be frozen at £50,270.

The following changes were also announced:

• Corporation tax for companies with profits above £250,000 will rise from 19% to 25% in April 2023, however rates will remain at 19% for companies with profits of less than £50,000, with a taper above this amount (it’s estimated that only around 10% of companies will pay the top rate)
• The stamp duty holiday for purchases in England and Northern Ireland has been extended until 30 June 2021, and following this there will be a reduced rate until 30 September
• Inheritance tax thresholds, pensions life time allowances and annual capital gains tax exemptions are frozen at current levels until 2025
• Alcohol, tobacco and fuel duties are also frozen

What did the 2021 Budget say about business?

There were several measures announced designed to support businesses during the UK’s economic recovery.

A flagship policy was the new “super deduction”, a tax cut for businesses investing in new plant and machinery assets from 1 April 2021 until 31 March 2023. The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.

Other announcements included:

• The incentive for businesses employing new apprentices has been extended until September 2021 and increased to £3,000 per apprentice. Funds were also announced for a new style of apprenticeship programme in England that will allow apprentices to split their course across multiple employers, and additional funding for traineeships for 16-24 year olds in the 2021/22 academic year
• Introduction of Help to Grow schemes:
  • Help to Grow Management – a subsidised course designed to support the growth of small businesses
  • Help to Grow Digital – free impartial advice on how technology could boost small businesses, with discounts of up to 50% on certain software for eligible businesses
• A new visa scheme designed to make it easier for start-ups and rapidly growing tech firms to source talent from overseas

Investment in the North East

There were some potentially exciting announcements for our region, too.

A new Treasury base is to be established in Darlington. The “second headquarters” will employ 750 civil servants and local politicians hope it will attract further investment into the region.

Sunak also announced that Teesside will be home to the biggest “freeport” in the UK, with others set to be built at East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent and Thames. The Teesside Freeport is expected to create 18,000 skilled jobs within five years.

Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border, but where different customs rules apply. They can reduce administrative burdens and tariff controls, provide relief from duties and import taxes, and ease tax and planning regulations.

What else was in the 2021 Budget?

Other important points include:

• The National Living Wage will be increased to £8.91 from April
• Universal Credit claimants will continue to get a £20 weekly top-up for a further six months, while Working Tax Credit claimants will receive a £500 one-off payment
• Additional funding for the coronavirus vaccine rollout (£1.65bn), domestic violence programmes (£19m), victims of the Thalidomide scandal (£40m) and mental health services for veterans (£10m)

Talk to the experts

We know understanding what’s in the Budget and how it will affect your business can be confusing. If you have any questions on what the 2021 Budget means for your business, please don’t hesitate to get in touch with our Tyne and Wear based team.

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article.