The UK Chancellor, Rishi Sunak, has today announced the UK Spring Budget 2021. The key points have been summarised below, but please note that some of these announcements will apply to England only, but in many cases will have consequentials for Scotland. A total of £1.2bn has been promised for Scotland through the Barnett formula.

OBR forecasts

OBR now forecasting swifter and more sustained recovery than previously expected, with economy expected to return to pre-covid levels in the middle of next year

• Still expect that in 5 years’ time our economy will be 3% smaller than it would have been without Covid
• Economy expected to grow 4% this year, 7.3% in 2022
• Unemployment lower than expected, forecast to peak at 6.5%

Plan to protect jobs

• The CJRS furlough scheme has been extended until the end of September. Employees will continue to receive 80% of salary for hours not worked. Employers will need to contribute 10% in July, and 20% in August and September
• Support for self-employed will continue with a fourth grant covering the period February to April and a fifth grant for May onwards. The fourth grant will provide 3 months’ support at 80% average trading profits. The fifth grant will also provide 3 months’ support, but support will become more targeted – if turnover has fallen by 30% or more, the grant will remain at 80%. If turnover has fallen by less than that, it will be a 30% grant
  • SEISS will now be available for all self-employed who have filed a tax return by midnight 2^nd March 2021
• The Universal Credit uplift of £20 a week will continue for a further 6 months. Working tax credit claimants will get equivalent support through a one off payment of £500
• Visa reforms will be introduced to reduce bureaucracy to recruit high-skilled migrants. More detail will be set out in July

Business support

• (England only) new Restart Grants will be made available to help businesses reopen. Non-essential retail will receive grants of up to £6000, whilst hospitality, personal care, and leisure will receive grants of up to £18,000. Arts and culture institutions will also receive support
• BBLS, CBILS and other loans are coming to an end soon, so the Government are introducing a new Restart Loan Scheme, to provide businesses with loans of between £25,000 and £10m, available through to the end of this year, with an 80% government guarantee to lenders
• (England only) The 100% business rates holiday for retail, hospitality and leisure will be extended through to the end of June. Business rates will then be discounted by 2/3 up to value of £2m for closed businesses, and lower cap for those who can stay open, until March 2022
• 5% reduced VAT rate for hospitality and tourism will be extended for 6 months until 30^th September, and will then have interim rate of 12.5% VAT until April 2022
• A new mortgage guarantee scheme will enable all UK homebuyers to secure a mortgage up to £600,000 with only a 5% deposit

Tax changes

• (England only) Personal tax thresholds will increase next year to £12,750 and will then be frozen at this rate until 2026. The higher rate threshold will also be increase next year to £50,270 and be frozen until 2026
• In April 2023 the rate of corporation tax will increase to 25%
  • Protecting small businesses with profits of £50,000 or less, creating a Small Profits Rate which will continue to sit at 19%
  • Will introduce a taper so that only companies with profits of over £250,000 will be taxed at the full 25% rate – only 10% of companies
• Not raising rates of Income Tax, National Insurance, or VAT
• Tax treatment of losses: companies can now carry back losses of up to £2million for up to three years, meaning they can now claim additional tax refunds of up to £760,000
• A planned increase on alcohol duties will be cancelled, and fuel duty will be frozen.

Investment

• Super Deduction – for the next two years, when investing in new equipment, companies can now reduce tax bill by 130% of the cost – aims to boost business investment by 10% and will be worth £25bn over the two years
• New UK Infrastructure Bank to be based in Leeds, and invest across UK in public and private projects to finance green industrial revolution. The bank will have £12bn initial capitalisation this Spring, aiming to support at least £40bn infrastructure
• The £375 million UK-wide ‘Future Fund: Breakthrough’ will invest in highly innovative companies such as those working in life sciences, quantum computing, or clean tech, that are aiming to raise at least £20 million of funding
• Updated monetary policy remit will be published for the Bank of England, reflecting the importance of sustainability and transition to Net Zero Carbon
• A new UK-wide scheme, Help to Grow, will help SMEs to increase productivity through providing funding for training and mentoring in management and digital
• The Government will be launching two consultations to make sure R&D tax reliefs and enterprise tax incentives are internationally competitive

You can read the initial response to the budget from British Chambers of Commerce here, and if you have any questions or comments, please contact us via our policy inbox.