The Big Budget Breakdown 2021
04th March 2021
Chancellor Rishi Sunak made a lot of announcements in his recent Budget statement. Here’s what it all means for you in real terms:
Furlough and Self-Employment Support
The end of the UK’s full-on lockdown might finally be in sight, but that doesn’t mean all those lifelines for workers are being cut overnight. Here’s the update on the most important COVID-19 support schemes:
- The furlough system’s been extended until the end of September, with employees getting 80% of their wages paid for their lost hours of work. Employers are being told to contribute 10% in July, with that percentage doubling to 20% in August.
- The Self-Employment Income Support Scheme (SEISS) is also getting another 2 rounds of grants. The first of these this will cover 80% of your average profits over 3 months (up to £7,500), but the rules are changing after that. For the 5th (and probably final) grant, what you receive will depend on how badly you’ve been hit by the pandemic. If your turnover’s dropped by at least 30%, you’ll still get the 80% rate. Otherwise the grant will drop to 30%, with a cap of £2,850.
- Another little wrinkle in the SEISS announcement is that people who’ve only become self-employed in 2019/20 can now qualify for a grant as well. That’s around 600,000 extra people qualifying for help!
There’s a new recovery loan scheme in the offing, taking the place of some of the previous loans. Businesses will be able to get between £25,000 and £10 million, with the government guaranteeing them up to 80%.
Focusing on hard-hit businesses in retail, hospitality, personal care and leisure, there’s also a new “Restart Grant” launching to offer up to £18,000 to businesses damaged by COVID-19. For non-essential retail firms, the grant will be £6,000.
Another boost for retail and hospitality came in the form of a 3-month extension to business rates relief. After that time runs out, the rates will be dropped to a third another 9 months.
In an effort to boost the number of businesses taking on apprentices, a few tweaks to the system were announced. Businesses putting apprentices to work between the 1st of April and the 30th of September 2021 will get £3,000 for each one they hire. This comes on top of the £1,000 incentive payment that already exists for taking on younger apprentices.
Corporation Tax will be sticking at 19% for businesses with under £50,000 of yearly profits. Bigger firms will see a tax increase to 25%. There’ll also be a “super-deduction” for businesses that are investing, meaning they’ll be able to drop their taxable profits by 130% of their investment costs.
Universal Credit and Working Tax Credits
The rise in Universal Credit was set to run out at the end of March. With the number of people claiming the benefit doubling during the pandemic, that rise will now remain in place until September. People claiming Working Tax Credit will qualify for a one-and-done payment of £500 instead.
With finding a deposit becoming almost impossible for so many hopeful homebuyers, the new Budget brings a few pieces of good news. For one thing, there’s a 3-month extension to the Stamp Duty holiday. This means buyers will only be paying tax on the value of the property over £500,000. After the 30th of June, the threshold will switch to £250,000 until the end of September, when it’ll drop back down to £125,000.
To be fair, first-time buyers won’t feel the effect of this much, since they already qualify for a tax break on homes worth up to £300,000. However, there’s also been a new 95% mortgage scheme announcement in the 2021 Budget. Under this scheme, the government will be offering guarantees to mortgage providers on loans that only need a 5% deposit. Of course, this won’t actually make homes any more affordable – but it could help first-time buyers overcome the biggest obstacle keeping them off the property ladder.
Tax and Wages
As always, the Budget brought a string of announcements about tax. Here are the main headlines to take away:
- The tax-free Personal Allowance threshold will rise to £12,570 next year, but then will freeze until 2026.
- The higher rate tax threshold will rise to £50,270 then freeze for 5 years as well.
- The slashed VAT rate of 5% for entertainment, hospitality and accommodation firms will stay put until the end of September. After that, it’ll rise to 12.5% for the next 6 months.
- The National Living Wage will be rising to £8.91 per hour in April. This includes workers aged 23-24, who previously got a lower rate.
In real terms, locking the tax thresholds like this is expected to push a million people into a higher tax bracket over the next 5 years, plus another million paying tax for the first time.
Those are the broad strokes of the 2021 Budget. There’s still more detail to come out on some of the announcements and measures. As always, if you’ve got any questions or worries about how it affects you, your family and your business, get in touch with RIFT Tax Refunds for expert help from the UK’s leading tax specialists.