Spring Budget 2021
Rishi Sunak delivered his second Spring Budget today promising to continue to do “whatever it takes” to support people and businesses through the current Coronavirus pandemic, announcing extensions to the Furlough Scheme and Self-Employment Income Support Schemes to name but a few.
The magnitude of the unprecedented Government support will mean that we will be paying for the crisis for many years to come, with the national debt forecast to rise from 88.8% of GDP this year to a peak 97.1% in 2023/24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.
To continue to support the economy through the crisis, and balance the books going forward, the Chancellor set out a three-point plan to:
- support people and businesses
- fix the public finances
- build a better future
The extension of the support for businesses and employees was welcome and will help locked down businesses reopen over the summer.
Whilst the Chancellor resisted announcing another “help out to eat out scheme” at this point in time, the extension of the 5% reduced rate of VAT to 30 September 2021, with a 12.5% rate until 31 March 2022, will help the struggling hospitality sector as they open up as lock down measures are eased.
We have long known that this unprecedented level of Government support would come at a cost and the Chancellor outlined a few tax raising measures in this Budget, with no doubt more to come in the future, and we will be paying close attention to the announcements made on ‘Tax Day’ 23 March 2021.
The Chancellor also used other stealth ways of raising tax by freezing some allowances that will inevitably bring more people within the tax net.
Raising tax is only one way of reducing the debt to GDP ratio, and both the Chancellor and Prime Minister are keen to grow the economy, and maximise the new freedoms that Brexit has brought with the announcement of eight new English Freeports.
The extension to the £500,000 Stamp Duty nil-rate band until June 2021, then £250,000 until September 2021, is clearly meant to continue the stimulus to the housing market and protect and create jobs, along with a new mortgage guarantee scheme that will enable all UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.
Companies are being encouraged to invest with the announcement of a new “super-deduction” which will cut companies’ tax bills by 25p for every pound they invest in new equipment. This is worth around £25 billion to UK companies over the two-year period that the super-deduction will be available.
Pre-Budget there had been much speculation that there could be major changes to the Inheritance Tax and Capital Gains tax regimes, and whilst these were largely not addressed in the Budget, the comprehensive review of capital taxes by the Office of Tax Simplification, and the continued need to raise taxes, means that a major overhaul of capital taxes could come in a future Budget, or as part of the announcements made on ‘Tax Day’, 23 March.
As always, the content of the speech is the tip of the iceberg with many more announcements contained in the press release that followed.
Our experts have been busy dissecting all the information from the Chancellor’s statement and have created useful, jargon free summaries so you can understand how the Budget affects you and your business.