What you need to know about furlough, tax hikes and more.
This spring Budget, as announced by the Chancellor Rishi Sunak on 3rd March 2021 is the probably the most packed in the seven years I’ve been writing about them.
A lot of the measures where leaked in the days ahead, but there was plenty of new announcements, and I’ve compiled a list of the key ones below.
It was billed as a Budget to protect jobs, so there wasn’t a huge amount on how we’ll pay for the additional spending – but we still heard about a few of the ways money will be raised in taxes.
You can watch this round up video or keep reading
More detail will come in the next few days, and I’ll add information below as it’s revealed.
I’ll also be talking to the Financial Time’s consumer editor Claer Barrett on Friday’s episode of my Cash Chats podcast to analyse everything. You can subscribe now on your favourite podcast app so you don’t miss it.
Jobs & benefits
The Coronavirus Job Support Scheme, due to end on 31st April 2021, will now finish on 30th September 2021.
Employees on furlough will continue to receive 80% of their wages up to £2,500 a month, though from the summer businesses will have to contribute some of the cash. In July it’ll be 10% of the 80%, and in August and September it’ll be 20% of the 80%.
Watch more about the furlough extension in this video
Self-employment scheme extended
Those eligible for SEISS (Self-Employment Income Support Scheme) will be able to apply for another three-month payment in April, covering 80% of profits up to £7,500.
There will also be a fifth (and final) grant to cover May to September. Those who have seen a turnover loss of 30% or more will get the same 80% (so up to £7,500). But if the turnover drop is less than 30% the grant will be reduced to 30% of those profits (capped at £2,850). It’ll be available from July 2021.
What’s also different this time is that it’ll now be based on the 2019/2020 self-assessment form, which brings in around 600,000 people who have previously missed out.
Nothing for ExcludedUK
Once more there was nothing to help the remaining 2.4m people who’ve had no support in the last year because they were limited company directors, freelancers, people on fixed term contracts or people earning a mix of PAYE and self-employment income.
Universal Credit uplift
The £20 extra weekly payment for low-income households claiming UC will be extended for six months. It will now stop at the end of September 2021. This was after a huge amount of pressure from the oppostion and other groups.
Eligible Working Tax Credit recipients will receive the same amount but as a £500 one-off payment.
The surplus earnings threshold for UC will remain at £2,500 for another year and then revert to £300.
The government’s incentive for employers to bring on apprentices between April and September 2021 will be doubled to £3,000 per apprentice.
From June there will also be subsidised management training (Help to Grow: Management) and in the Autumn free digital training available (Help To Grow: Digital), as well as discounts on software. You can register interest here.
Tax & Savings
Green bond for savings
A new “Green bond” will be available to the public to put their savings in accounts that’ll help fund green initiatives. It’ll be from NS&I (National Savings and Investments) from the summer of 2021. The rate hasn’t been announced.
Income tax freeze
The different income tax thresholds were due to increase slightly from April 6th and this will go ahead, but they’ll stay at this level until 2026. This means:
- The first £12,570 earned is tax free (Personal Tax Allowance, though it reduces for earners over £100k)
- The next £37,700 is taxed at 20% (basic rate tax)
- Earnings above £50,270 are taxed at 40% (higher rate tax)
- Earning over £150,000 are taxed at 45% (additional tax rate)
This is really a stealth tax increase as you’ll lose out in real terms as inflation means prices you pay elsewhere will have gone up and if you get a salary increase you could be moved into the higher tax bracket.
In April 2023 Corporation Tax will jump to 25% on company profits from its current 19%.
Companies with profits of under £50,000 will see the rate remain at 19% under a “Small Profits Rate”, while the increase will be tapered above this. In total only 10% of businesses will pay the full rate (those with profits above £250,000 a year). The differnet tiers haven’t been revealed.
This is less of a blow for small businesses as was feared, especially those with smaller profits. It’s a big increase for big companies, but no doubt something the likes of Amazon and Facebook can avoid as we didn’t see a mooted digital sales tax.
Pension, capital gains and inheritance tax freezes
Other tax thresholds will stay at the same rate including Inheritance tax, Capital Gains Tax and the Pensions lifetime allowance. These will stay the same until 2026.
Booze increase frozen
All planned alcohol (Scotch, wine, cider and beer) will be frozen for another year.
The petrol duty increases will also not happen in April.
Other travel taxes such as Air Passenger Duty, Vehicle Excuse Duty and company vehicle benefits will increase inline with inflation.
Stamp Duty holiday extended
The £500,000 threshold where no Stamp Duty is required will carry on for another three months in England and Northern Ireland.
Then from July until the end of September the nil-rate band will be £250,000. From 1st October it will return to the normal £125,000.
Scotland and Wales are still to announce what they are doing.
New 95% mortgage scheme
The government will guarantee mortgages for homebuyers to encourage more lenders to offer 95% mortgages. So it means you’ll be able to buy with a 5% deposit, subject to meeting the usual affordability criteria.
It’ll be capped at properties worth £600,000, but it won’t be restricted to first-time buyers or new build homes as other schemes have been.
Homebuyers will be able to fix for up to five years and the scheme will run until December 2022.
Shopping & retail
Contactless limit to increase to £100
You’ll now be able to tap your card without entering your PIN on payments up to £100. This is a massive jump up from £45, which was only increased from £30 a year ago.
It might take a short while for retailers to change systems for this to work.
VAT cut extended
The 5% rate of VAT (down from the usual 20%) for hospitality and tourism will remain until end of September.
It’ll then go to 12.5% for the next six months, before returning to 20% in April 2022.
No new schemes to get people shopping
There was no repeat of Eat Out To Help Out or similar schemes to get us shopping.
Non-essential and leisure retailer grants
“Non-essential” retailers that will be able to open in mid-April will be able to claim “restart grants” of up to £6,000 per site.
Hospitality and leisure businesses in England that will open later – such as pubs, hotels, restaurants, gyms and hairdressers – will be able to apply for grants of up to £18,000 each
There’s a similar fund set up for the other UK nations to distribute to retailers.
Business rate cut
Until the end of June, Business Rates will remain at zero for eligible retail, entertainment and leisure properties. It will be discounted by two-thirds until 31st March 2022.
Recovery loans scheme
Any business can apply for loans between £25,000 and £10m, with the government guaranteeing 80% of the money borrowed.
Super Deduction on tax for business investment
Companies spending money on equipment will be able to offset 130% of the cost against profits for two years.
More grants for sport and the arts
Most museums, cinemas, theatres and music venues have been closed for almost a year. An extra £300m will be added to £1.57bn Culture Recovery Fund, £18.8m going to community initiatives and £77m to Scotland, Wales and Northern Ireland.
Another £300m will go to support sports such as cricket and tennis, and there will be money for a 2030 UK and Ireland World Cup bid.
A new national bank based in Leeds will be funding public and private green initiatives.
Funding for vulnerable groups
There will be funding for some groups:
- An extra £19m to tackle domestic abuse
- £10million for military veterans with mental health problems
- A lifetime commitment for victims of the Thalidomide scandal
Visa reform for “highly skilled”
To encourage overseas workers from industries such as science, tech and engineering it’ll be easier to get a work visa via a points-based scheme.