Welcome to the 2021 Budget Newsletter from HJS Financial Planning
Sunak sets out Budget to protect businesses
Yesterday Wednesday 3 March, Chancellor Rishi Sunak set out a Budget to protect businesses through the pandemic, fix the public finances and begin building the future economy.
The economic outlook
The OBR expects the economy to grow faster than previously forecast. The economy is now forecast to grow by 4% in the coming fiscal year, and then by 7.3% in 2022.
However, Sunak noted that the pandemic is still inflicting profound damage on the economy. The OBR predicts that, in five years, the economy will still be 3% smaller than it would have been otherwise.
The improved outlook also means peak unemployment is expected to fall. It’s now expected to reach 6.5%, compared to the initial forecast of 11%.
The Personal Allowance – the threshold before you need to pay Income Tax – will increase from £12,500 to £12,570 as planned in the 2021/22 tax year. The threshold for higher-rate taxpayers will also rise from £50,000 to £50,270 in 2021/22.
However, both these thresholds will then be frozen until 2026. So, while you may not face an immediate tax rise, the freeze will affect income in real terms over the next few years.
The chancellor also announced that several other allowances will freeze, rather than rising in line with inflation:
- The pension Lifetime Allowance (£1,073,100)
- The Capital Gains Tax allowance (£12,300)
- The Inheritance Tax nil-rate band (£325,000) and residence nil-rate band (£175,000)
Again, these freezes could affect personal finances in the long term.
Covid -19 Support
The Chancellor once again pledged to do ‘whatever it takes’ during the COVID-19 pandemic and confirmed that the furlough scheme would be extended until September to support jobs through the crisis.
Mr Sunak also confirmed that the Self-Employment Income Support Scheme (SEISS) has also been extended, with two further grants this year. Claimable by the self-employed who have filed their tax return for 2019/20 by midnight on 2 March 2021, these grants are also available to those newly self-employed from 6 April 2019.
The stamp duty nil-rate band on residential properties in England up to £500,000 will continue until the end of June. It will taper to £250,000 until the end of September, and then return to the usual level of £125,000 from 1 October.
Citing the latest economic forecasts from the Office for Budget Responsibility (OBR), Mr Sunak said the economy is predicted to grow by 4% this year and by 7.3% in 2022. However, despite further growth predicted for the following three years, the economy will still be 3% smaller in five years’ time than it would have been if the pandemic had not hit the economy.
To support businesses as they re-open following lockdown, £5 billion will be made available in restart grants. Non-essential retail businesses re-opening first will be eligible for up to £6,000 but the leisure and hospitality sectors, which have been worse affected and will re-open later, will be eligible for up to £18,000.
Hospitality and leisure businesses will also pay no business rates for the next three months, then rates will be discounted for the remaining nine months of the year.
However, the rate of corporation tax will increase to 25% in April 2023 for companies with profits over £250,000, whilst retaining a Small Profits Rate of 19% for companies with profits of £50,000 or less.
Tax on beer, wine, cider and spirits has been frozen while fuel duty will also remain frozen for an 11th consecutive year.
Mr Sunak also introduced green measures, including a new national infrastructure bank, which will open in Leeds with £12 billion capitalisation from the government, which will also offer a green retail savings product.
He also confirmed the location of the eight Freeports in England. Freeports are special economic zones with favourable tariffs and lower taxes to make it easier and cheaper to do business.
For a detailed overview of the 2021 Budget and what the measures mean for you and your business, visit The HJS Solutions Group Budget Report summary.
WHAT THEY SAID
‘We need a real commitment to give every business, large or small, the opportunity to grow, innovate and succeed.’
Rishi Sunak, Chancellor of the Exchequer
‘After the decisions of the last year and the decade of neglect, we needed a Budget to fix our economy, to reward our key workers, to protect the NHS and to build a more secure and prosperous economy for the future.’
Keir Starmer, Leader of the Labour Party
‘The Chancellor has gone above and beyond to protect UK businesses and people’s livelihoods through the crisis and get firms spending.’
Tony Danker, Director General of the Confederation of British Industry
‘Extensions to furlough, business rates relief and VAT reductions give firms a fighting chance not only to restart but also to rebuild.’
Dr Adam Marshall, Director General of the British Chambers of Commerce
‘The continuation of business rates and VAT discounts is critical, and it’s important that those in supply chains benefit from them, not just those that neatly fit the definitions of frontline retail, leisure and hospitality.’
Mike Cherry, National Chairman of the Federation of Small Businesses
For the full Budget announcements visit:
IN THE NEWS
2021 Budget – the economic picture
Within his Budget speech, Chancellor Rishi Sunak unveiled billions in financial support for businesses and families adversely affected by the coronavirus (COVID-19) pandemic.
Click here for the full story
2021 Budget – the political reaction
Addressing the House of Commons, Chancellor Rishi Sunak used the 2021 Budget to ‘do whatever it takes’ to financially support people and business as the UK recovers from the coronavirus (COVID-19) pandemic.
2021 Budget – the business reaction
Business groups have responded to Chancellor Rishi Sunak’s 2021 Budget speech.
Click here for the full story