Budget 2021: key points at a glance

Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons today 3 March 2021.

Setting out the government's tax and spending plans for the year ahead, he announced new measures to help business and jobs through the pandemic and to support the UK's long-term economic recovery and a series of tax-raising plans to help rebalance the public finances.

Measures to support business are outlined in more detail below, including a further extension of the furlough scheme; grants for the self-employed; restart grants for the most hard-hit business sectors; an extension of the business rates holiday and a discounted VAT rate for those businesses; a new ‘mortgage guarantee scheme’ for first time buyers and an extension of the reduced stamp duty rules.

State of the economy and public finances

UK economy shrank by 10% in 2020.

• Economy forecast to rebound in 2021, with projected annual growth of 4% this year.
• Economy forecast to return to pre-Covid levels by middle of 2022, with growth of 7.3% next year.
• 700,000 people have lost their jobs since pandemic began.
• Unemployment expected to peak at 6.5% next year, lower than 11.9% previously predicted.
• UK to borrow a peacetime record of £355bn this year.
• Borrowing to total £234bn in 2021-22.

Coronavirus support

• The chancellor says unemployment will peak at 6.5%, down from a forecasted peak of 11.9% last July. That means 1.8 million fewer people are expected to be out of work than previously thought, he says.
• The Coronavirus Job Retention Scheme (the furlough scheme) has protected more than 11 million jobs since its inception last March and had been due to close at the end of April 2021.
• Sunak confirms the extension of the furlough scheme until the end of September. Employees will continue to receive 80% of their wages until the scheme ends, but firms will be asked to contribute 10% in July and 20% in August and September as the scheme is gradually phased out.
• The self-employment income support scheme has also been extended. The fourth grant will cover February to April, worth 80% of average trading profits up to £7,500. There will be a fifth grant from May to September 2021. People whose turnover has fallen by 30% or more will get the 80% grant, but self-employed people whose turnover has fallen by less than 30% will get a 30% grant. The government is widening access to grants, meaning some 600,000 more self-employed people will be eligible. People who filed their tax returns for 2019-20 by midnight on Tuesday 2 March 2021 are now eligible.
• £20 uplift in Universal Credit worth £1,000 a year to be extended for another six months.
• Working Tax Credit claimants will get £500 one-off payment.
• Minimum wage to increase to £8.91 an hour from April 2021.

Business support

VAT

The temporary reduced rate of 5% for the tourism and hospitality sector will be extended until the end of September 2021, and a 12.5% rate will then apply until 31 March 2022, following which the 20% standard rate is reinstated.

 The recovery

 As the government-backed bounce back loan (BBL) and coronavirus business interruption loan scheme (CBILS) come to an end, the Treasury is launching a new loan scheme to run until the end of the year.

A new recovery loan scheme is available from 6 April 2021. Any business can apply for loans of between £25k to £10m, with an 80% government guarantee.

High street business may be eligible for a new restart grant scheme, designed to help with the costs of re-opening after lockdown – these will be distributed by Local Authorities. These will be worth up to £6,000 per premises for non-essential retail and up to £18,000 per premises for hospitality, leisure and personal care.

The business rates holiday for hospitality and leisure businesses will continue to the end of June 2021, and rates will then be discounted by two-thirds for the remaining nine months of the financial year.

 Both unincorporated business and companies which make trading losses in 2020/2021 and 202120/22 will be able to carry the losses back for up to three years (up to £2m).

Fraud and error

 The government is investing in a new Taskforce comprising over a thousand HMRC staff to tackle fraud and error within the coronavirus support packages, including the furlough and self-employed schemes. Over time we expect to see enquiries being opened on a risk-based approach.

 Housing

Stamp Duty Land Tax (SDLT)

The stamp duty holiday on properties up to £500,000 will continue until the end of June 2021. It will taper to £250,000 until the end of September, and then return to the usual level of £125,000 from 1 October 2021.

95% mortgage scheme

The chancellor confirms a mortgage guarantee to help first-time buyers access 95% mortgages. The scheme will be available from April 2021, enabling homebuyers to purchase properties worth up to £600,000 with just a 5% deposit. Both first-time buyers and existing homeowners can take advantage of it.

Taxation

Corporation Tax

From April 2023, the main rate of Corporation tax increases from 19% to 25%. The 19% rate will remain for the smallest companies, with profits below £50,000, and there will be a return to the days of marginal rates of tax for companies with profits between £50,000 and £250,000. The effective marginal tax rate for the first £200,000 of profits in excess of £50,000 will be 26.5%.

From 1 April 2021 to 31 March 2023, companies investing in qualifying plant and machinery will benefit from a 130% capital allowances “super deduction”. This means expenditure of £100 attracts tax relief of £24.70 instead of £19.

 Income Tax

The personal allowance was due to rise in the new tax year, but Mr Sunak revealed this threshold will be frozen.

The tax-free Personal Allowance and the higher tax rates income tax threshold will be increased from April 2021 to £12,570 and £50,270 respectively, where they will remain until 2026.

Other taxes and allowances

Despite a lot of pre-Budget speculation, nothing was announced on the capital gains tax rates nor was there any change to, or removal of, Business Asset Disposal Relief.

There were no changes to other rates and allowances, including the inheritance tax nil band and residence nil band, the pensions lifetime allowance, the capital gains tax annual exemption and the VAT registration threshold.

Health and education

• £1.65bn to support the UK's vaccination rollout.
• £19m for domestic violence programmes, funding network of respite rooms for homeless women.
• £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee.
• £10m to support armed forces veterans with mental health needs.

The arts and sport

• £400m to help arts venues in England, including museums and galleries, re-open
• £300m recovery package for professional sport and £25m for grassroots football

Alcohol, tobacco and fuel

• All alcohol duties to be frozen for second year running.
• No extra duties on spirits, wine, cider or beer.
• Fuel duty to be frozen for eleventh consecutive year.

Environment, transport, infrastructure and housing

• New UK Infrastructure Bank to be set up in Leeds with £12bn capitalisation from the government.

Green projects will be supported through a green recovery bond.