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Budget 2021-22 opening remarks
Chancellor Rishi Sunak delivered his Budget statement 2021-22 today, extending a range of support measures to get the nation through the worst of the pandemic.
Chancellor Sunak said;
“We have announced over £280bn of support, protecting jobs, keeping businesses afloat, helping families get by. Despite this unprecedented response, the damage coronavirus has done to our economy has been acute. Since March, over 700,000 people have lost their jobs. Our economy has shrunk by 10 per cent — the largest fall in over 300 years.
“Our borrowing is the highest it has been outside of wartime. It’s going to take this country – and the whole world — a long time to recover from this extraordinary economic situation. But we will recover.”
Chancellor’s 3-point plan for economy restoration
Chancellor Sunak announced his three-point plan for restoring the British economy from the ravages of the pandemic.
“First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis,” he says.
“Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that.
“Third, in today’s Budget we begin the work of building our future economy.”
He says the economy will be 3% smaller in five years than it would have been. The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.
Chancellor confirms that Coronavirus Job Retention (Furlough) Scheme will be extended until end of September. He said millions of workers will continue to receive 80% of their wages for the hours they cannot work in the pandemic, until the scheme ends.
“As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September,” Sunak says.
Self-employed Grant extension
Like Furlough scheme, support for the self-employed will also continue in the form of Self Employed Income Support Scheme (SEISS) until September, with another two grants covering the period February to April, and from May onwards.
The fourth grant will provide three months of support at 80 per cent of average trading profits. For the fifth grant, people will continue to receive grants worth three months of average profits.
Support for 600,000 newly self employed
Some 600,000 self-employed people who were unable to claim government grants will be now be able to do so. The new policy will help hundreds of thousands of newly self-employed who have not been eligible for the income support scheme.
As the tax return deadline has now passed, 600,000 more people, many of whom became self-employed last year, can now claim the 4th and 5th grants.
Grants worth 80 per cent of three months’ average trading profits, up to £7,500, will made available. The self-employed will be able to claim the grants on the basis of their 2019-2020 tax returns.
He says this is “one of the most generous programmes anywhere in the word”.
Meanwhile, the value of the fifth grant will be determined by a turnover test, to ensure that support is targeted at those who need it the most as the economy reopens.
People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. The final grant can be claimed from late July.
Universal Credits uplift
Universal Credit top-up of £20-per-week will continue for a further six months.
Chancellor said, “We’ll provide Working Tax Credit claimants with equivalent support for the next six months. Because of the way that system works operationally, we’ll need to do so with a one-off payment of £500”.
The Chancellor said the temporary increase, introduced at the start of the coronavirus pandemic, would remain in place for half a year and “well beyond” the end of the current national lockdown in England.
The Government’s temporary Covid-19 support for families on benefits is worth £1,040 a year (£20 per week) and was supposed to only last a year.
National Living Wage increases
From April 2021, the National Living Wage will increase from £8.72 per hour for over-25s to £8.91 per hour.
Chancellor said, “Over the course of this year, as the economy begins to recover, we are shifting our resources and focus towards getting people into decent, well-paid jobs. We reaffirm our commitment to end low pay, increasing the National Living Wage to £8.91 from April — an annual pay rise of almost £350 for someone working full time on the National Living Wage”.
VAT cut extended
The five per cent reduced rate of VAT for the hospitality sector will be extended for six months to 30 September. After that, it will rise to an interim rate of 12.5 per cent for another six months; not returning to the standard 20 per cent rate until April next year.
Chancellor said, “One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4m people need our support. In total, we’re cutting VAT next year by almost £5bn”.
Business rates holiday extended
Hospitality and leisure businesses pay no business rates for three months, then rates will be discounted for the remaining nine months of the year by two-thirds, in a £6bn tax cut, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open. A £6bn tax cut for business.
Chancellor said, “Last year, we provided an unprecedented 100 per cent business rates holiday, in England, for all eligible businesses in the retail, hospitality and leisure sectors — a tax cut worth £10bn. This year, we’ll continue with the 100 per cent business rates holiday for the first three months of the year, in other words, through to the end of June.”
Stamp duty holiday extended
Chancellor Sunak extended the stamp duty holiday for a further three months, until end of June 2021, with a tapered end until the end of September.
The stamp duty holiday was first introduced back in July last year to reignite the UK housing market following months of closure during the first coronavirus lockdown. The government raised the stamp duty threshold from £125,000 to £500,000, helping to boost market activity and sending house prices rocketing.
But the pandemic has also slowed the sales process and forced some buyers to wait months for the transaction to complete.
In recent months property experts had warned that many home buyers would be unable to complete their deals before the 31 March deadline due to a backlog.
The new £500,000 nil rate band will end on 30 June, before it is reduced to £250,000 until the end of September.
Personal tax thresholds frozen
As predicted by various experts (£6bn stealth tax), personal tax thresholds have been frozen and annual increase to the tax free personal allowance has been abandoned.
Chancellor Sunak says he “wants to be honest” with the public about how the government will nurse the British economy back to health after the pandemic.
“This government is not going to raise the rates of income tax, national insurance, or VAT. Instead, our first step is to freeze personal tax thresholds,” he says.
The personal tax threshold will rise, as outlined in the Tory manifesto, to £12,570 next year. However, it will then be frozen until April 2026.
Corporation tax to rise to 25% from 2023
From 2023, the rate of corporation tax, paid on company profits, will jump from 19 per cent to 25 per cent, but with protection for smaller businesses. Companies with profits of less than £50,000 will still pay 19 per cent, meaning only 10 per cent of firms will pay the higher rate.
Chancellor said, “Even after this change the UK will still have the lowest corporation tax rate in the G7 — lower than the US, Canada, Italy, Japan, Germany and France”.
Company losses tax treatment
For the next two years, the tax treatment of company losses will be made significantly more generous by allowing businesses to carry back losses for three years, providing a significant cash flow benefit.
Chancellor said, “This means companies can now claim additional tax refunds of up to £760,000. And because of the current eight per cent bank surcharge, the implied overall tax rate for banks would be too high. So we will review the surcharge, to make sure the combined rate of tax on the UK banking sector doesn’t increase significantly from its current level – and to make sure this important industry remains internationally competitive”.
‘Super Deduction’ to boost investment
Chancellor announced a new “Super Deduction” that will allow businesses to claim 130 per cent of their new machinery cost as a tax cut.
“For the next two years, when companies invest, they can reduce their tax bill not just by a proportion of the cost of that investment, as they do now or even by 100 per cent of the cost, the so-called full expensing some have called for. With the Super Deduction they can now reduce their tax bill by 130 per cent of the cost.”
HMRC could miss out on as much as £29bn as a result of the policy. Shares in telecoms provider BT, which is in the process of upgrading its infrastructure, rose 6.4 per cent on the back of the announcement.
Under the scheme, companies investing in qualifying new plant and machinery assets will benefit from a 130 per cent first-year capital allowance.
Investing companies will also benefit from a 50 per cent first-year allowance for qualifying special rate (including long life) assets, the Treasury said.
This upfront super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.
Alcohol duty and fuel duty frozen
Fuel duty is to remain frozen at 57.95p per litre for both petrol and diesel for the 11th year running, the Chancellor of the Exchequer has announced.
This is a tough time for hospitality. So I can confirm that the planned increases in duties for spirits like scotch whisky, wine, cider and beer will all be cancelled. All alcohol duties frozen for the second year in a row — only the third time in two decades. And right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel. So, the planned increase in fuel duty is also cancelled.”
New tech visas
Sunak announced new visa reforms aimed at “highly-skilled” migrants.
Chancellor said, “A new unsponsored points-based visa to attract the best and most promising international talent in science, research and tech, new, improved visa processes for scale-ups and entrepreneurs, and radically simplified bureaucracy for high-skilled visa applications”.
Business Restart Grant & Recovery Loan Scheme
- New Restart Grant available for businesses in April and to those who open later, with up to £18,000 available
- Bounce Back Loans and CBILS to be replaced by new Recovery Loan Scheme
- Business of any size can apply for recovery loans from £25,000 to £10m through to the end of this year
Chancellor Rishi Sunak has announced a new Restart Grant of up to £6,000 per premises in April and and up to £18,000 for firms that open up later.
The grant is aimed at helping businesses ‘reopen and get going again.’ The Chancellor said non-essential retail will open first, so they will receive grants of up to £6,000 per premises. Hospitality and leisure businesses, including personal care and gyms, will open later or be more impacted by restrictions when they do, and will therefore receive grants of up to £18,000.
“That’s £5bn of new grants on top of the £20bn we have already provided, taking our direct total care and support for businesses to £25bn,” said Sunak.
As the Bounce Back Loans and CBILS program also come to an end, a new Recovery Loan Scheme will take their place. Businesses of any size can apply for loans from £25,000 to £1 Om through to end of this year. The Government will provide an 80% guarantee to lenders.
“As well as supporting people’s jobs, incomes, the lowest paid and most vulnerable – this Budget also protects business.”
The government will also double the incentive payments for businesses to £3,000 to all new apprentice hires of any age, investing £126m to triple new traineeships.
By tradition, chancellors are allowed to drink alcohol at the Despatch Box while giving the Budget. This includes alcohol, which is otherwise banned under parliamentary rules. Teetotal Sunak was seen sipping water during his budget speech.
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