Budget announcements: key points

4 March, 2021
by: Cripps Pemberton Greenish

The Chancellor made a number of announcements in the Budget on 3rd March 2021, we have summarised the key points you need to know about.

Extension of the furlough scheme

The furlough scheme will be extended until the end of September 2021, continuing to fund 80% of employees’ wages for their furloughed hours up to a limit of £2,500 per month.

Until the end of June 2021 the current funding arrangements will remain in place, with the only payments required by employers being the minimum employer pension contributions and employer National Insurance contributions. From 1st July employers will also be required to pay 10% of employees’ wages and the Government support will decrease to 70%. From 1st August until 30th September the required employer contribution will be 20%, with the Government support at 60%.

Self-employment scheme

The self-employment scheme is also extended with access extended to the newly self-employed, provided that they have submitted tax returns for the 2019/20 tax year before 3rd March.

The 4th grant under this scheme covering February to April can be claimed, as previously, at the level of 80% of average trading profits up to £7,500.  For the 5th grant (which will be available from July and covers the period from May onwards) individuals who have suffered a reduction to their self-employment income of 30% or more will be eligible to an 80% grant. If their loss of self-employment income is less than 30%, they will be eligible to a 30% grant. The rationale is that it is fair to target support towards those most affected by the pandemic as the economy reopens over the summer.

National Minimum Wage

The National Living Wage will increase from April 2021 from £8.72 to £8.91 per hour. It will also be extended for the first time to 23 and 24 year olds.

Apprentices

The incentive payment for businesses hiring new apprentices will be doubled to £3,000.

Income tax

The rates of income tax and National Insurance are unchanged. The personal allowance will continue to go up to £12,570 as planned, but will then be frozen at this level until 2026. Similarly the higher rate threshold will go up to £50,270 but will be frozen for the same period.

The ‘restart grant’

A grant has been made available for businesses forced to close because of the pandemic.  Non-essential retail, due to open in April, can claim up to £6,000 per premises.  Gyms, personal care providers and leisure and hospitality businesses, due to open in May, can claim up to £18,000.

Recovery Loans Scheme

As the Bounce Back Loans and Business Interruption Loans come to an end, a new Recovery Loans Scheme has been announced.  This means businesses of any size can apply for loans from £25,000 up to £10m. The government will continue to provide lenders with an 80% guarantee.

Extension of business rates holiday

The business rates holiday in England will continue until the end of June and for  the remaining nine months of the tax year, rates will be cut by two thirds.  This means that many eligible businesses will receive a 75% cut in their business rates bill next year.

Lower VAT rate for hospitality and tourism

The VAT rate for hospitality and tourism businesses will remain at 5% until the end of September.  From 1 October, this will increase to 12.5%, not returning to the normal rate of 20% until April next year.

Corporation tax

In April 2023 corporation tax on company profits from £250,000 will rise from 19% to 25%. A taper will be introduced above £50,000, so businesses will only start paying the full rate on profits over £250,000.

For smaller businesses, a Small Profits Rate has been introduced.  This will remain at 19% for businesses with profits of £50,000 or less.

Stamp duty

The cut in stamp duty is said to have helped hundreds of thousands of people since it was introduced last year.  Due to the number of transactions being processed, it was recognised that many wouldn’t complete before the end of March.  It has now been extended by three months, meaning until the end of June nobody will pay stamp duty up to £500,000.

From 1 July 2021, the nil rate band will be £250,000 until the end of September.

Personal tax

Inheritance tax thresholds, pensions life time allowances and annual capital gains tax exemptions will be frozen until 2025-26.

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