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Budget 2021 – Quick Summary

With the economy shrinking by 10% in 2020 with it forecast to rebound in 2021 by 4% and 7% in 2022. 700,000 people have lost their jobs during the pandemic, despite all the Coronavirus Support Schemes and unemployment is expected to hit 7.3% next year, although this is significantly less than the previous 11.9% predicted. Today Rishi Sunak, the Chancellor of the Exchequer set out the Government’s tax and spending plan for the year ahead. Below is a quick summary of this. A more details summary can be found here.

Whilst some who have been left behind in previous measures are now included, there are still those that have been unfortunately excluded from any support.

‘Good’ News

  • Furlough (or Coronavirus Job Retention Scheme, CJRS) extended until the end of September 2021, with Government continuing to pay 80% of employees’ wages. Employers to contribute 10% in July and 20% in August and September 2021.
  • Self-Employed Income Support Scheme (SEISS) for the self-employed will also to be extended until September 2021, with 600,000 more self-employed people now eligible.
  • Stamp duty holiday on house purchases in England and Northern Ireland extended to June, with no tax liability on sales of less than £500,000. This will then fall to £250,000 nil rate band until the end of September, before returning to its original value of £125,000 from 1 October 2021.

‘New’ News

  • Tax breaks for firms to “unlock” £20bn worth of business investment currently held in reserves, with firms able to deduct investment costs from tax bills, reducing taxable profits by 130% with the Super Deduction.
  • Incentive grants for apprenticeships to rise to £3,000 and £126m for traineeships.
  • VAT rate for hospitality firms to be maintained at reduced 5% rate until September, then interim 12.5% rate to apply for the following six months.
  • Business rates holiday for firms in England to continue until June with 75% discount after that.
  • £5bn in Restart grants for shops and other businesses forced to close. £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses.
  • £20 uplift in Universal Credit worth £1,000 a year to be extended for another six months, with Working Tax Credit claimants eligible for £500 one-off payment.
  • Minimum wage to increase to £8.91 an hour from April 2021.

How will this be funded (or ‘Bad’ News)?

  • Although there will be no changes to rates of income tax, national insurance or VAT, there will be freezes to the allowance going forward with:
    • Personal income tax allowance to be frozen at £12,570 from April 2022 to 2026;
    • Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026; and
    • No changes to inheritance tax or lifetime pension allowance or capital gains tax allowances.
  • Corporation tax on company profits to rise from 19% to 25% in April 2023. However, small businesses with profits of £50,000 or less won’t be affected, while only businesses with profits of £250,000 or more will be taxed at the full 25% rate due to tapering. Additionally, businesses are able to carry back up to £2m of losses (per group) up to three years in each of the financial years 2020/21 and 2021/22.

‘Interesting’ news

  • Contactless payment limit will rise to £100 later this year.
  • New visa scheme to help start-ups and rapidly growing tech firms source top talent from overseas.
  • All alcohol duties to be frozen for second year running, with no extra duties on spirits, wine, cider or beer. Fuel duty to be frozen for eleventh consecutive year.
  • £15bn in green bonds, including for retail investors, to help finance the transition to net zero by 2050.
  • £1bn Towns Fund to promote regeneration in 45 English towns and £150m for community groups to take over pubs at risk of closure.

Black and White Accounting

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