Chancellor Rishi Sunak has today delivered his Budget to Parliament.
The OBR forecasts the economy to return to pre-Covid levels by the middle of 2022, with growth of 7.3% next year. Covid-19 has undoubtedly done damage and the economy will be 3% smaller in five years than it would have been.
Here is a summary of the key details.
Continuation of Covid Support
- Furlough extended until end of September 2021. Employees will receive 80% of salary throughout the whole period however employers will be expected to contribute 10% in July and 20% in August & September.
- Self-employed support extended until September. The fourth grant running from February to April will cover 80% of averaged profits. The 5th grant running from May onwards will cover up to 80% of average profits but only for those where turnover has fallen by more than 30% as a result of Covid. For those where turnover has fallen by less than 30% the grant reduces to 30% of average profits. The scheme is now available to the newly self-employed who have completed their 19/20 tax return.
- The Restart Grant will be available from April paying up to £6,000 per premise for non-essential retail businesses and up to £18,000 for hospitality and leisure businesses.
- BBLS and CBILS have been replaced by the New Recovery Loan Scheme. Businesses can apply for a loan from £25k to £10m with the continuation of the government guarantee at 80% to the lender. This new scheme will be open until the end of Dec 2021.
- The business rates holiday will continue at 100% until the end of June 2021 and then at a level of two thirds until the end of March 2022.
- VAT on hospitality and tourism will continue at the reduced rate of 5% until 30th Sept 2021 after which it will increase to 12.5% until 31st March 2022, returning to 20% thereafter.
This seems to have gone further than anticipated and hopefully will allow more business to survive and retain jobs.
Business Tax Changes
- The rate of corporation tax will increase to 25% from April 2023 for those businesses with profits of £250,000 or more. However small businesses with profits less than £50,000 will retain the current rate of 19% and those with profits between £50,000 and £250,000 will see a tapering increase between the 19% and 25% rate.
- Tax losses up to a value of £2m can be carried back for up to 3 years.
- A new business Super Deduction scheme is in place for the next 2 years, providing 130% first year tax relief on any capital investment.
- £3,000 support payment for any new apprentice hired, of any age.
- Duties frozen on both alcohol and fuel.
- Help to Grow scheme launched for small businesses, further information can be found on gov.uk/helptogrow
Personal Tax Changes
- Income Tax, National Insurance and VAT rates to remain unchanged.
- The thresholds for tax-free personal allowance of £12,570 and the higher rate threshold of £50,270, that are due to commence from April 2021 will to be frozen until April 2026.
- Inheritance tax, pensions allowance, VAT registration threshold and CGT allowance to remain at current levels.
- National Living Wage to increase to £8.91 from April 2021.
- Continuation of the nil-rate stamp duty on the first £500,000 up to 30th June 2021. This will then reduce to £250,000 from 1st July – 30th September 2021 reverting back to £125,000 from the 1st October 2021.