#Budget2021: #Update - 5 things to look out for from Rishi Sunak

Updated: Jun 25


- What we expected

- What was delivered


Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons.


Setting out the government's tax and spending plans for the year ahead, he announced new measures to help business and jobs through the pandemic and to support the UK's long-term economic recovery and a series of tax-raising plans to help rebalance the public finances.


Summary of the main points.


Coronavirus support


  • Furlough to be extended until the end of September

  • 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

  • Support for the self-employed also to be extended until September

  • 600,000 more self-employed people will be eligible for help as access to grants is widened

  • £20 uplift in Universal Credit worth £1,000 a year to be extended for another six months

  • Working Tax Credit claimants will get £500 one-off payment

  • Minimum wage to increase to £8.91 an hour from April

State of the economy and public finances

  • UK economy shrank by 10% in 2020

  • Economy forecast to rebound in 2021, with projected annual growth of 4% this year

  • Economy forecast to return to pre-Covid levels by middle of 2022, with growth of 7.3% next year

  • 700,000 people have lost their jobs since pandemic began

  • 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

Taxation

  • No changes to rates of income tax, national insurance or VAT

  • Personal income tax allowance to be frozen at £12,570 from April 2022 to 2026

  • Higher rate income tax threshold to be frozen at £50,270 from 2022 to 2026

  • Corporation tax on company profits to rise from 19% to 25% in April 2023

  • Rate to be kept at 19% for about 1.5 million smaller companies with profits of less than £50,000

  • Stamp duty holiday on house purchases in England and Northern Ireland extended to June, with no tax liability on sales of less than £500,000

  • No changes to inheritance tax or lifetime pension allowance or capital gains tax allowances

Health and education

  • £1.65bn to support the UK's vaccination rollout

  • £19m for domestic violence programmes, funding network of respite rooms for homeless women

  • £40m of new funding for victims of 1960s Thalidomide scandal and lifetime support guarantee

  • £10m to support armed forces veterans with mental health need

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

Business, digital and science

  • Tax breaks for firms to "unlock" £20bn worth of business investment

  • Firms will be able "deduct" investment costs from tax bills, reducing taxable profits by 130%

  • Incentive grants for apprenticeships to rise to £3,000 and £126m for traineeships

  • VAT rate for hospitality firms to be maintained at reduced 5% rate until September

  • Interim 12.5% rate to apply for the following six months

  • Business rates holiday for firms in England to continue until June with 75% discount after that

  • £5bn in Restart grants for shops and other businesses forced to close

  • £6,000 per premises for non-essential outlets due to re-open in April and £18,000 for gyms, personal care providers and other hospitality and leisure businesses

  • New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas

  • Contactless payment limit will rise to £100 later this year

  • Business rates holiday extended to June

  • Contactless payment limit will rise to £100

Alcohol, tobacco and fuel

  • All alcohol duties to be frozen for second year running

  • No extra duties on spirits, wine, cider or beer

  • Fuel duty to be frozen for eleventh consecutive year

Environment, transport, infrastructure and housing

  • New UK Infrastructure Bank to be set up in Leeds

  • It will have £12bn in capital, with aim of funding £40bn worth of public and private projects

  • £15bn in green bonds, including for retail investors, to help finance the transition to net zero by 2050

Nations and regions

  • £1.2bn in funding for the Scottish government, £740m for the Welsh government and £410m for the Northern Ireland executive

  • 750 UK civil servants to be relocated to new Treasury campus in Darlington

  • £1bn Towns Fund fund to promote regeneration in 45 English towns

  • £150m for community groups to take over pubs at risk of closure

  • First eight sites for freeports in England announced

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WHAT WE EXPECTED


1. More support for jobs and workers





The chancellor has already said he "is preparing a Budget that provides support for people" as unemployment hovers at a five-year high and four million workers are on furlough.


He is set to announce the furlough support scheme will be extended until the end of September, with employers asked to contribute to workers' salaries from July.

From then, employers will be expected to contribute 10%, increasing to 20% in August and September, as the economy reopens.


Employees will continue to receive 80% of their salary for hours not worked until the scheme ends.


He is also tipped to extend a £20-per-week uplift to Universal Credit for six months, after intense pressure from MPs and charities to do more to help the poor get through the pandemic.


Some want him to go further and make the uplift permanent - but the chancellor may resist as he struggles to get government borrowing under control.


2. Will he cut business rates?



Mr Sunak may have promised grants of up to £18,000 to get businesses going again, but the bigger question is what he will do about business rates.


MPs across the board say the tax, which is calculated using the value of a company's premises, is unfair and outdated. The boss of Next, Lord Simon Wolfson, recently told the BBC rates could kill off the High Street and cost countless jobs if business rates are not reformed.


But the chancellor is likely to leave the thorny question of what to do about rates - including levying a so called "Amazon tax" on online retailers - until the autumn.


However, reports suggest he will extend the business rates holiday - brought in last year to support shops - beyond its current end date of 31 March and into the summer.


3. Will he raise taxes?




Despite the anticipated generosity, the chancellor has said he will use the Budget to "level" with the public about the challenges facing the economy and the need to repay the vast sums of public money spent during the crisis.


According to reports, Mr Sunak is likely to announce some tax increases - although whatever he does will have to fit around with the Conservative party manifesto pledge not to raise income tax, national insurance or VAT.


Some think he will instead raise corporation tax from its current level of 19% to 23%, which is still below the G7 average. The rise would be staggered over the course of the parliament, reportedly bringing in £12bn.


There are also rumours he will freeze the personal income tax allowance, which usually rises in line with inflation, pushing many taxpayers into higher bands and netting HMRC about £6bn.


Tory backbenchers are strongly opposed to tax rises, while the Labour leader Kier Starmer has warned they risk "choking off" a rapid economic recovery.


But ex-Conservative leader Lord Hague has said "personal and business" taxes must rise to help government finances.


4. Help for levelling up?


The chancellor is likely to set out his vision for a post-Covid (and post-Brexit) economy, which could mean more money for "levelling up" different parts of the UK.


According to the Financial Times, he is preparing to announce the locations of freeports - special economic zones with low taxes that would help stimulate regional growth.

He's also expected to announce more funding to help the UK meet its decarbonisation goals.


There are likely to be measures to promote more environmentally friendly homes and renewable energy - but he is not expected to raise fuel duty.


5. Stamp duty holiday extension

The stamp duty holiday introduced last year not only propped up the housing market at the start of the crisis, but also drove up the average value of a home by 8.5% in 2020.


That tax break is up at the end of March, and many buyers have found themselves facing big bills if they don't complete their transactions on time. However, Mr Sunak will extend stamp duty holiday to prevent this cliff edge, reports suggest.


The government mortgage guarantee scheme will offer 95% mortgages for houses worth up to £600,000.


It is based on the Help to Buy mortgage guarantee scheme, which closed to new loans at the end of 2016.


This is a policy that the Treasury says "reinvigorated the market for high loan-to-value lending after the 2008 financial crisis".


But housing charity Shelter said that scheme increased house prices by 1.4%, making housing less affordable for many.


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