Budget 2021: What does it mean for you?

On Wednesday 3rd March, Chancellor Rishi Sunak delivered the Budget in Parliament, following a year of extraordinary economic challenge because of the ongoing COVID-19 pandemic.

We’ve heard a lot from Mr Sunak throughout the last year as he introduced various financial support packages for individuals and businesses across the UK. And the theme for this Budget remained much the same.

Setting the tone for the announcement, the Chancellor began saying that Coronavirus had “fundamentally altered” our way of life. And that he will do “whatever it takes” to protect the UK economy.

Providing a further £65bn of fiscal support, Chancellor of the Exchequer said the Budget meets the moment with a three-part plan to protect the jobs and livelihoods of the British people. First, doing whatever it takes to support people and businesses, second, fixing public finances, and third, building our future economy.

Here is a summary of the main points:

The economy and public finances

The damage the virus has done to the UK economy has been “acute”, with the UK economy shrinking by 10%.
The economy is set to rebound in 2021, with projected annual growth of 4% this year.
Forecasts predict the economy to return to pre-COVID levels by the middle of 2022, with growth of 7.3% next year.
The National Living Wage will increase to £8.91 from £8.72 per hour in April.

Furlough

Unemployment will peak at 6.5%, instead of the forecasted 11.9%.
An extension to the Coronavirus Job Retention Scheme until the end of September 2021.
Employees will continue to receive 80% of their wages, for the hours they cannot work, paid for by the government. They will then ask employers to contribute 10% in July, 20% in August and 20% in September.

Support for self-employed

An extension to support for those self-employed until the end of September 2021.
If self-employed turnover has fallen by 30% or more, people will receive the 80% grant. And people who have seen their income fall by less will receive a 30% grant.

Support for businesses

£5 billion in Restart grants for businesses closed due to COVID-19. Eligible companies will be entitled to grants worth up to £18,000.
Extra funding is to go into the traineeship scheme, boosting the bonus from £1,000 to £3,000 per trainee.
As the Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) come to an end, Mr Sunak announced a new recovery loan scheme in their place. Businesses of any size can benefit from loans between £25k to £10m.
The business rates holiday for hospitality, leisure and non-essential retailers will continue for another three months.
VAT will remain at 5% for hospitality firms until September 2021, then will rise to 12.5% for the following six months.
A new Help to Grow scheme aimed at small businesses will offer free online courses from top business schools, developing management and digital skills.

Housing and infrastructure

Stamp Duty holiday on properties up to the value of £500,000 will continue until June 2021. Then, it will decrease to £250k until September 2021, before reducing to the standard level of £125k after.
A mortgage guarantee will help first-time homebuyers who can only afford a 5% deposit.

Taxation

Income tax, national insurance and VAT are to stay the same. However, income tax thresholds will freeze.
In April 2021, the tax-free Personal Income Tax Allowance will rise slightly to £12,570, the Basic Rate Income Tax threshold to £37,700, and the Higher Rate Income Tax threshold to £50,270. However, they will remain at that level until 2026.
The Lifetime Allowance, Inheritance Tax threshold, and Capital Gain Tax allowance are frozen until April 2026:
The Lifetime Allowance will remain at £1,073,100 until 2026.
The Inheritance Tax allowance will remain at £325,000 each (plus an additional £175,000 to pass on your property to a direct descendant) until 2026.
The Capital Gains Tax allowance will remain at £12,300 per year until 2026.
Individual Savings Account (ISA), Junior Individual Savings Account (JISA), and Child Trust Funds allowances remain unchanged.
In April 2023, the rate of corporation tax will increase from 19% to 25%. A small profits rate of 19% will remain for smaller businesses with profits of less than £50,000, and there will be a tapered rate for businesses in between.

Green investments

The Chancellor announced a new green investment bank based in Leeds, which will have £12 billion capital, with a target of £40 billion worth of public and private projects.
A ‘green’ retail savings bond is to be launched by NS&I this summer.