Rishi Sunak Delivered His Much Awaited Budget Speech

Rishi Sunak delivered his much awaited Budget speech earlier today. It is probably fair to say this is one of the most highly anticipated of all budgets due to the current global pandemic. Speculation beforehand asked whether The Chancellor was going to now take the opportunity to raise taxes to repay some of the £270.6bn* borrowed to fund the pandemic response, or whether now was not the time and to try and pump further into the economy to stimulate some form of economic growth off the back of England’s Coronavirus roadmap.

We have been inundated with ‘hushed’ rumours of Stamp Duty and Furlough extensions which many say had already set the tone for this budget. Just yesterday the suspicions of the extension of the furlough scheme were confirmed with the scheme being extended until September 2021. But did the rest of the budget follow suit?

The team at AWM eagerly listened in this afternoon, and below we have summarised the main points.

*Source, Office for National Statistics

Summary

This was definitely a budget of two halves, Rishi Sunak was very honest in his delivery and stated that the first priority was to protect, support and create jobs but that that was going to come at a future cost. Whilst admitting it was not the time to announce tax rises across the board, The Chancellor did announce several policy changes and tax freezes. We have summarised some of the main points below.

Forecasts

The OBR have predicted that the UK will now have a swifter and more sustained recovery than initially predicted in November 2020.

They estimate growth to be; 

4% in 2021

7.3% in 2022

1.7% in 2023

1.6% in 2024 and 1.7% in 2025

Job support, protection, creation (Individuals)

  • Extension of the Furlough scheme until September 2021. From July 2021 companies utilising the scheme will be asked to contribute a small percentage of the 80% payment.
  • Self Employed individuals may be eligible for a 4th and 5th grant. Those previously ineligible for the self employment grants due to starting businesses in the 19/20 tax year, will now be eligible to apply for the grant but only on the basis they have already submitted their 19/20 tax return.
  • £20 Universal Credit uplift will remain for 6 months           
  • Living wage to increase to £8.91 in April 2021

Job support, protection, creation (Businesses)

  • Companies to be eligible for £3,000 funding for the hire of apprentices at any age
  • “Restart Grant” available for businesses who have not been able to open. Up to £6,000 for non-essential retail, per premises. And up to £18,000 for personal care, and gyms extra.
  • “Recovery Loan” available to businesses for loans of between £25,000 and £10m where the government will guarantee lenders up to 80% of the debt.
  • Business rates holiday for 3 months, and then 2/3 discount for the next 9 months.
  • VAT on hospitality reduced to 5% until 30th September 2021 and then 12.5% until April 2022 where it will then revert to normal.

Housing

  • Stamp Duty Holiday will remain in force until 30th June 2021. Between 30th June 2021 and 30th September 2021 Stamp Duty will start at a threshold of £250,000, raising to the usual £125,000 in October 2021.
  • 95% mortgages to be available.

Funding Economic Recovery

  • Income Tax rates, National Insurance, VAT frozen
  • Personal Allowance to raise to £12,570 from 2022 and then to remain at this point until April 2026
  • Higher rate income tax allowance to raise to £50,270 from 2022 and then to remain at this point until April 2026.
  • Inheritance Tax threshold, Pension Life Time Allowance, Capital Gains Tax allowances all frozen at current rates until April 2026.
  • Corporation Tax to rise to 25% in 2023 but based on company profits. Companies with profits sub £50,000 will have corporation tax remain at 19%. Those with profits between £50,000 and £250,000 will have corporation tax rates tapered between 19% and 25% respectively. Those over £250,000 will have 25% corporation tax rates from 2023.
  • Planned rises on duty of beer, wine, cider, spirits and fuel have all been frozen.
  • For any further information on any of the points above, please do not hesitate to get in contact with your adviser. 

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