Highlights from the UK Spring Budget
The UK Spring Budget was delivered on 3 March 2021 by the Chancellor, Rishi Sunak, setting our government spending plans, tax changes and long-term investment plans till 2026.
The message in the short term was no surprise - continued COVID funding to support workers, businesses and individuals as we live on during the pandemic.
Long-term, green focused investment plans to create jobs and encourage businesses to invest, innovate and have a standing on the global stage in a post Brexit world.
We may have been far off in terms of our predictions of expected tax rises, but there was certainly some surprises as well as ambitious green project funding plans in the medium to long-term to support the government’s plan for job creation.
Highlights of the Spring Budget below.
COVID funding update
The Furlough Scheme has been extended to the end of September 2021, with workers continuing to receive 80% of their usual wage, and employers contributing from July at 10%, and 20% for August and September.
A £5b high street grants or 'restart grants': replacing monthly grants to closed businesses during the pandemic, worth up to £18,000 per firm, which will help shops and pubs reopen as England eases lockdown, available from April. The devolved nations will receive equivalent extra funding.
4th & 5th Self Employment Income Support Scheme (SEISS) Grant - For those previously excluded, in other words the newly self employed with first tax returns submitted in 2019/20, can now access the funding. The grant is 80% of average trading profits if you have suffered at least a 30% drop in profits as a result of the pandemic. For those businesses with less than 30% drop in profits, would be able to access a 30% top up grant. The fourth grant covers February to April inclusive, and the 5th grant covers May 2021 onwards, and will remain open on 3 monthly periods for as long required.
NEW government backed Recovery Loan Scheme - to replace the CBILs and BBLs schemes, closing on 31 March. Any size of business can apply for 80% government backed loans of £25,000 up to £10 million, applications accepted to the end of 2021.
Barnett formula increase for Scotland: The Treasury has announced a further £1.2bn of coronavirus support funding for Scotland. The UK Government said the cash takes the amount allocated through the Barnett formula north of the border since the start of the pandemic to £9.7bn.
Support for small businesses
Help to Grow Programme - Management Training: there will be a Help to grow scheme for management training, lead by business schools giving SMEs access to executive management training, mentoring from businesses leaders as well as peer learning, with 90% of the tuition covered by the government.
Help to Grow Programme - Digital Training: SME’s will be offered 50% discount on productivity software worth up to £5,000 available from the Autumn to increase their digital capabilities, essential in a post COVID world.
£126m Traineeship scheme: Traineeships are intended to get people into their first job after education. They last from six weeks to six months and they are open to people aged between 16 and 24. Currently, firms in England are given £2,000 for every new apprentice they take on under the age of 25, and £1,500 for those over 25, in addition to a £1,000 grant they are already getting under another project. The Chancellor has promised to increase the cash incentives for employers who take on an apprentice to £3,000 - regardless of their age, from April.
An "elite" visa to encourage high-skilled workers to the UK: including researchers, engineers and scientists, with a no points or sponsorship visa requirement, focused particularly for scale ups and entrepreneurs to help them operate and innovate from the UK.
Research and Development (R&D ) and EIS/SEIS Schemes: 2 wide ranging consultations are now underway to enhance these schemes to encourage business innovation and investment in the UK so they are more internationally competitive.
Support for Individuals
Universal Credit -£20 uplift will continue for a further 6 months and those who receive Working Tax Credits will receive a £500 one off payment.
National Living Wage: will rise to £8.91 from 6 April, translating to a £350 annual pay increase
Stamp duty holiday: Will be extended to the end of June for those who are still closing on house sales. Thereafter, the threshold will fall to £250,000 threshold, and will only revert to the usual level of £125,000 threshold from 1st October.
A new government-backed mortgage guarantee scheme for home buyers with 5% deposits. Some large banks have already signed up to scheme including Lloyds, NatWest, Barclays, HSBC, Santander and more to come. This will come into effect from April.
A "world-first" green savings bond for retail investors to help boost the UK's transition to net zero emissions.
Tax update
Super Deduction tax relief: touted by the Chancellor as the biggest tax cut in modern British history to help drive the economy post Brexit and the pandemic slowdown. This super deduction tax will encourage those businesses who have done well over the pandemic and have stored up cash, to invest in new assets and machinery giving them a 130% reduction in their tax bill, available for the next 2 years.
Increase in Corporation Tax to 25% for those businesses who have declared profits of half a million pounds. The corporation tax rate will remain at 19% for declared profits £50,000 or under, and profits above £50,000 will have a tapered increase to their corporation tax bill. This change will come into effect from April 2023, when the OBR forecast the UK economy will be on its way to recovery post pandemic.
No increase to Income tax, VAT or National Insurance Contributions for the next year
There will be a freeze in Personal Allowance and this will remain at £12,500 for the new tax year. The following tax year, 2022/23, the personal allowance will increase to £12,570 and the higher rate tax rate band will increase to £50,570, and both will remain at this level until 2026, if the Tories are still in government.
The Inheritance tax threshold, pension lifetime allowance and capital gains tax allowance will remain unchanged until 2026, if the Tories are still in government.
5% VAT cut for hospitality and tourism sectors: this is now extended for a further 6 months to 30 September, thereafter will not revert to standard 20% but will be slowly increased, first to 12.5% for a further six months, and will move to standard rate from April 2022
VAT will not increase for the next two years for all other sectors and industries
Duties are frozen for fuel and alcohol for the next year
100% business rates holiday for businesses with premises in England - this will continue until the end of June, and thereafter the remaining 9 months of the tax year until April 2022, will be discounted by two thirds.
Investment & Green Agenda
The Hill Review: The chancellor and Boris Johnson want to create a new stock market listings regime as part of their efforts to build an “agile” new economy after Brexit and the pandemic, focused on innovation and technology.
A Sovereign Green Bond: to accelerate the UK’s push to zero carbon emissions, where retail investors can get the opportunity to buy into green projects
Scientific Super Power ambitions: a further £1.6 billion to go towards for future preparedness of pandemics
Unlocking pension funds to invest in innovate ventures: fill in scale up funding gap for companies to list in the UK
Freeports: the first 8 locations for England’s freeports. Freeports is a place to carry out business inside a country’s land border with more relaxed customs rules and tax reliefs available to help businesses operate in a post Brexit world. The 8 locations are: London Thames, Liverpool, Solent, East Midlands, Felixstowe and Harwich, Plymouth & South Devon, Humber and Teeside.
A UK Infrastructure Bank: based in Leeds, to invest in UK wide private and public projects, with an initial capitalisation of £12 billion
