Newsletter - Budget 2021

Here is a roundup of the Chancellor's 2021 Budget from yesterday.

Finance & Taxation

• Pension Lifetime Allowance to be frozen
• Pensions to have access to ‘green investments’– FCA consultation to follow shortly
• No changes to rates of income tax, national insurance or VAT
• Personal income tax allowance to be frozen at £12,570 from 2022 - 2026
• Higher rate income tax threshold to be frozen at £50,270 from 2022 – 2026
• Stamp duty freeze extended for a further three months in England and Northern Ireland
• After this date, the starting rate of stamp duty will be £250,000 until the end of September. Stamp duty will then return to the usual level of £125,000
• Corporation tax on company profits to rise from 19% to 25% in April 2023, with a taper
• Rate to be kept at 19% for about 1.5 million smaller companies

95% Mortgages

The UK’s biggest lenders will be offering 95% mortgages guaranteed by the government from next month to help buyers with small deposits get on or up the property ladder. Sunak said: “Even with a stamp duty cut there is still a significant barrier to people getting on the housing ladder.” This scheme, he said, would provide a chance for those who can’t afford a big deposit to buy their own home. It would be available to all borrower types – not just first-time buyers – on all properties up to the value of £600,000. Please speak to our Mortgage Adviser Rachael Smith asap.

COVID-19 Support

• Existing furlough to be extended until the end of September 2021
• Government to continue paying 80% of employees' wages for hours they cannot work
• Employers to be asked to contribute 10% in July and 20% in August and September
• Self-employed grants (SEISS) to be extended to tiers four and five. The fourth covers the three-month period from the start of February until the end of April. As with previous SEISS grants, it is worth up to 80% of trading profits, averaged over three months, up to £7,500 in total. The fifth grant covers early May to late July, but the amount available depends on loss of income
• Workers whose turnover has fallen by at least 30% can still apply for a grant for up to 80% of profits, up to a value of £7,500 in total. Those whose income has fallen by less than that can apply for up to 30% of trading profits, again averaged over three months. Claims can be made from next month for the fourth grant. Claims for the fifth grant will open in July. 600,000 more newly self-employed people will be eligible for help as access to grants is widened
• £20 uplift in Universal Credit to be extended for another six months
• National living wage to increase to £8.91 an hour from April 2021

State of the economy and public finances

• UK economy forecast to return to pre-Covid levels by middle of 2022
• Annual growth set to rebound by 4% this year, followed by 7.3% growth in 2022
• 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
• Debt as a share of GDP to fall from 4.5% next year to 3.5% in 2022-23

Health and education

• £19m for domestic violence programmes, funding network of respite rooms
• £40m of funding for Thalidomide victims and lifetime support guarantee

Business, digital and science

• Incentive grants for apprenticeships to rise to £3,000 and £126 for traineeships
• VAT cut for hospitality firms to be maintained at 5% until September
• Interim 12.5% rate to apply for the following six months
• Business rates holiday for firms in England will continue from April until June
• £5bn in re-opening grants for non-essential businesses of up to £6,000 per premises

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

Miscellaneous

• Fuel duty – frozen
• Air passenger duty (APD) – frozen until 2022 when it will be increased in line with RPI
• Vehicle Excise Duty (VED) –increased in line with RPI from 1 April 2021
• Alcohol duty – To further support the hospitality industry and its suppliers, the duty rates on beer, cider, wine and spirits will be frozen for another year

Freeports

In addition to the above the Budget confirmed the eight new freeports. Freeports in England – East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England. Subject to agreeing their governance arrangements and successfully completing their business cases, these Freeports will begin operations from late 2021. The Freeports will contain areas where businesses will benefit from more generous tax reliefs, customs benefits and wider government support, bringing investment, trade and jobs to regenerate regions across the country that need it most. Freeports in Scotland, Wales and Northern Ireland – Freeports will benefit the whole of the UK. Discussions continue between the UK Government and the devolved administrations to ensure the delivery of Freeports in Scotland, Wales and Northern Ireland as soon as possible. Businesses in these tax sites will be able to benefit from a number of tax reliefs.

UK Infrastructure Bank

A new UK Infrastructure Bank will also provide financing support to private sector and local authority infrastructure projects across the UK, to help meet government objectives on climate change and regional economic growth. The Bank will:

• be able to deploy £12 billion of equity and debt capital and be able to issue up to £10 billion of guarantees
• offer a range of financing tools including debt, hybrid products, equity and guarantees to support private infrastructure projects from the summer, offer loans to local authorities
• establish an advisory function to help with the development and delivery of projects

The institution will begin operating in an interim form later in spring 2021 and the Bank will be headquartered in Leeds.