On 3rd March 2021 the Chancellor, Rishi Sunak delivered one of the most important Budgets we've had for years, due to the impact the Coronavirus has had on our economy and many businesses.
In this article, I will cover the key points from the 2021 budget, and then go into more depth on some of the points, to give you more of an understanding of how it may affect you, or your business in the coming months.
What are the key points from the 2021 Budget?
- The furlough scheme has been extended.
- A fourth and fifth SEISS grant will be coming this year
- Stamp duty holiday extended
- New mortgage scheme announced
- Income tax rates frozen
- Changes to corporation tax
- Contactless payment limit to rise
- New Restart Grant
- New recovery loan scheme
- A freeze on pensions lifetime allowance, thresholds for capital gains tax and inheritance tax
I am employed but have been on furlough for some time now, how will the 2021 budget affect me?
Originally due to end at the end of April, furlough will now run until the 30th September 2021. Employees on furlough will continue to get 80% of their salary for hours not worked, up to £2,500 per month. That will remain the case until the scheme ends.
However, in July the state will only pay 70%, with employers expected to pay the remaining 10% of employee's reduced income, and in August and September the state will pay 60% and employers will have to pay 20%.
You can continue work part-time while on furlough or be furloughed full-time, as you can now.
I am self-employed, how will the 2021 budget affect me?
A fourth and fifth SEISS grant has been announced.
If you are self-employed, the fourth SEISS grant will be worth 80% of trading profits for three months, capped at £7,500. The value of the grants has varied since they were launched, but the next grant, which is supposed to cover February, March and April, will be worth 80%.
However there are still unanswered questions over the detail - for example, exactly how average profits will be calculated and over which years. Applications for the fourth SEISS grant will open late April until the end of May for those eligible, an exact date hasn't been announced, but if you are eligible you will be contacted with a personal claim date.
While previously you must have filed a tax return for 2018/19 to apply, it now says those who’ve filed a 2019/20 return may also be eligible – a move it says means over 600,000 more people may be able to apply. The Government says all other eligibility criteria will remain the same as the third grant.
When is the fifth self-employed grant coming and how will it be calculated?
The fifth SEISS grant, announced in the 2021 budget, its value will be linked to change in turnover covering May to September, and will be determined by a turnover test.
- If your turnover has fallen by 30% or more.. you'll be able to claim the full grant worth 80% of three months’ average trading profits, capped at £7,500.
- If your turnover has fallen by less than 30%... you'll be able to claim a grant worth 30% of three months' average trading profits, capped at £2,850.
The final grant can be claimed from late July and the Government says more info will be published in due course.
Currently in England and Northern Ireland there is a stamp duty holiday. This is now extended until the end of June. The holiday - which means buyers don't need to pay stamp duty on the first £500,000 of a property's purchase - had been due to end on 31 March. But it will now continue until the end of June.
Following that, until September the point at which you start paying stamp duty will be cut to £250,000, before returning to the usual £125,000 after that.
How about first-time buyers?
A new mortgage scheme has been announced, to help buyers with a 5% deposit. So how does this work?
If you have a deposit of 5%, you will be able to access 95% loan-to-value mortgages. This does not make a huge difference to the buyer, but does protect the lender more, as the scheme guarantees that if the lender lost money due to the borrower not keeping up with repayments, then the Government will cover some of this cost.
The scheme will open in April 2021 and run until December 2022.
For more information, check out this article from Martin Lewis, the Money Saving Expert:
How will my income tax be affected by the 2021 budget?
After a rise this April income tax thresholds have been frozen, meaning in real terms many will pay more tax.
The Chancellor said the Government would deliver on its promise to increase the personal allowance - the rate over which people start paying tax - to £12,570 next year, but said it would then stay unchanged until April 2026.
The higher rate threshold will similarly be increased next year, to £50,270, but will then also be frozen until 2026.
The pensions lifetime allowance and the thresholds for capital gains tax and inheritance tax will also be frozen until April 2026.
Corporation tax on company profits above £250,000 is to rise in April 2023. This will see a rise from 19% to 25%.
However, if your profits are less than £50,000 the rate is to be kept at 19% (affecting around 1.5 million smaller companies.)
If your business falls in between these bands then a taper relief will apply.
As a business I have been unable to open or trade during the pandemic, how will the 2021 budget affect me?
A new Restart Grant will launch in April to help businesses.
The Restart Grant is to help businesses forced to shut to reopen again. Helping them through to June 2021.
These will be available in England and will be worth up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
The Restart Grant will replace the monthly Local Restrictions Support Grants for open and closed businesses. Both of these close at the end of March.
To find out if you’re eligible for Restart support and/or to apply, visit your local council’s website.
If you are in the retail, hospitality and leisure industry, you should have already have benefitted from a business rates holiday. This has now been extended until the end of June.
“For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses, with a lower cap for those who have been able to stay open.” - Rishi Sunak
The 5% reduced rate of VAT for the tourism and hospitality sector will be extended for six months. It will now last until the end of September, with an interim rate of 12.5% for another six months after that.
Is there any other help available for business?
A Recovery Loan Scheme. This will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million. This will launch on 6 April and will be open to all businesses, including those who have already received support under the existing coronavirus guaranteed loan schemes.
What type of finance is available to my business?
- Term loans - up to 6 years
- Overdrafts - up to 6 years
- Invoice finance - up to 3 years
- Asset finance - up to 3 years
You must show that your business is/would be viable if not for the pandemic, that it has been impacted by the pandemic and that it’s not in collective insolvency proceedings.
If your business has received support from the existing loan schemes for Covid-19, as long as your business meets all the other eligibility criteria, you will still be able to access the finance from this scheme.
Is there anything else I need to know about the 2021 budget?