Last week, Chancellor Rishi Sunak delivered the Budget 2021 speech and announced a three-part plan to protect the jobs and livelihoods of people over the next fiscal year. The three steps include the following:
- Step one: Supporting the people and businesses throughout the current economic crisis.
- Step two: Once the economy begins to recover, the government will focus on mending public finances.
- Step three: Building the future economy of the country.
Over the next fiscal year, the government will focus on protecting, creating and supporting jobs and ensuring the UK economy returns to pre-Covid levels as soon as possible. More than 700,000 people have lost their jobs since March 2020 and the economy has shrunk by 10%. The Office for Budget Responsibility (OBR) are forecasting the UK economy to return to pre-Covid levels by the middle of 2022. Additionally, the unemployment rate is expected to peak at 6.5% in 2022 as opposed to the 11.9% that was originally predicted. The support schemes announced within the Spring budget aim to support these forecasts.
We summarise the main ways the government will be supporting businesses and individuals throughout the year:
Furlough Scheme extension
The Chancellor announced that the Furlough Scheme will be extended, and it will now run until 30th September 2021. The government will continue paying 80% of employees’ wages for the hours that they cannot work up until the end of July. As businesses begin to re-open, the government will ask employers to contribute 10% towards the hours that their employees cannot work, and this will increase to a contribution of 20% in August and September 2021. Employees will continue to receive 80% of their wages until the end of the Furlough Scheme.
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Supporting the self-employed
The government will continue supporting the self-employed through the Self-employment Income Support Scheme (SEISS) by providing a fourth grant covering the period between February to April 2021 and a fifth grant from May 2021 onwards.
The fourth grant is worth 80% of three months’ average trading profits which is up to £7,500 in total. Additionally, the fifth grant will be the final grant offered by the government under the scheme.
The government has also widened the eligibility for the SEISS allowing the newly self-employed that have filed a tax return in 2019-2020 to access the grants. The new eligibility criteria will allow 600,000 more self-employed people to apply for the grants under the scheme.
Corporation Tax Increase
The Chancellor announced the corporation tax rate on company profits will rise from 19% to 25% and this will take effect in April 2023. However, the rate will remain at 19% for small businesses with profits of £50,000 or less.
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Support for homebuyers
The Stamp duty holiday on house purchases in England and Northern Ireland is extended for a three-month period until 30th June 2021 in order to boost the property market and assist with the delays and backlog of property transactions.
The scheme has currently helped hundreds of thousands of people to buy a home and it is estimated that the extension may benefit 300,000 additional property purchases in England.
Some homebuyers continue to struggle to purchase a home despite the Stamp Duty Holiday. To further assist homebuyers, the government is introducing a new mortgage guarantee scheme, which will allow homebuyers to secure a mortgage with a low 5%deposit.
Lenders such as Lloyds, NatWest, Santander, Barclays and HSBC will offer 95% mortgages from April 2021 and the government anticipates more lenders will start to offer these mortgages.
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Grants for retail, hospitality and leisure businesses
In order to help high street business to reopen after the lockdown, the government will provide a new Restart Grant. Non-essential businesses will be opening first under the government’s 4-step roadmap to lifting the lockdown restrictions. These businesses will receive grants of up to £6,000 per premises. When the Hospitality and leisure businesses including personal care and gyms begin to open, they will receive grants of up to £18,000.
The government are aware that some businesses will require additional support to see them through the current economic climate. The government will also be offering businesses loans as additional support alongside the Restart Grants.
A New Recovery Loan Scheme will replace the Bounce Back Loan and The Coronavirus Business Interruption Loan Scheme which are due to end by 31st March 2021. Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of 2021. The government will also provide a guarantee to lenders of 80%.
Other announcements for businesses and Individuals:
- Support for low-income households: The £20 uplift in Universal Credit is to be extended for a further six months.
- National Living Wage: The minimum living wage will increase to £8.91 an hour from April 2021 giving full-time workers on the national living wage an annual pay rise of almost £350