Chancellor Rishi Sunak delivered his second Budget speech earlier this week setting out the Government’s tax and spending plans for the next year or so. He announced new measures to help businesses and jobs through the pandemic and to assist with UK’s long-term economic recovery. The Chancellor also set-out some revenue-raising plans to help “rebalance” the public finances.
This was all part of his three-part plan:
- Continue to do whatever is necessary to support businesses and jobs;
- Once we are on the way to recovery, we need to fix finances; and
- Help build the future economy.
This was certainly more of a give away rather than take away Budget and clearly the Chancellor was conscious not to “rock the boat” with unnecessary tax raises.
The following measures were announced
- Extension of COVID Job Retention Scheme or “furlough” scheme. This will now run through until the end of September with no changes for employees. Employers will need to start helping towards salary payments from 1 July 2021 (10%) with their contribution increasing for August and September (20%).
- Further support for the self employed with additional grants to be made. The newly self-employed who have filed tax return before midnight on 2 March 2021 will also now qualify for the additional support.
- Restart Grants for non-essential businesses of up to £6,000 per premises will be made and this will increase to up to £18,000 for those in hospitality and leisure businesses including personal care and gyms who have been heavily impacted and will continue to be for some time to come.
- A new Recovery Loan Scheme will be introduced as bounce back loans and CBILS come to an end.
- There will be an extension to the VAT cut for hospitality and tourism companies – this will remain at 5% until September with an interim rate of 12.5% for six months thereafter.
- Extension of the SDLT holiday until the end of July with a new £250,000 0% band being introduced until the end of September
This is an additional £65bn of measures and all told COVID will have cost £407bn – this is going to have to be repaid at some point!
So, what tax changes that everyone was worried about going into the Budget actually happened:
- No increases to Income Tax, NIC, Capital Gains Tax, Inheritance Tax or VAT were announced. However, the Chancellor did state that after the increases already announced for 2021/22, he would be freezing all tax allowances and bands for next five years. For those keeping score on the IHT nil rate band, this will have been in place for some 15 years before it will change! The Chancellor acknowledged that the frozen allowances and bands would result in increased taxation but he considered this to be a fair result.
- The freezing of the tax allowances and bands has also resulted in the same thing happening to the Pension lifetime allowance as well. The Government sold people on pension reform on the basis that the lifetime limit would go up with inflation and instead it went down in absolute terms and now has been frozen!
- Corporation Tax rates will increase to 25% from 1 April 2023, however, a Small Company Rate of 19% will be retained for those companies with profits under £50,000 together with a marginal tax rate for companies with profits between £50,000 and £250,000. Certain Family Investment Companies will also be excluded from the Small Company Rate due to anti-avoidance legislation and the Government has announced a new “associated company” rule to prevent perceived abuse of the lower 19% tax rate.
- Companies will be able to carry-back tax losses for up to three years.
- A new “Super Deduction” of 130% for capital expenditure on plant and machinery will come into effect from 1 April 2021. Clearly designed to help encourage business to kick-start the economy by investing in new equipment!
In more popular news, alcohol duties will be frozen for the second year in a row – time to restock that depleted wine cellar!