Chancellor Rishi Sunak provided an additional £65bn of fiscal support in today’s Spring Budget, promising the UK Government will do “whatever it takes” to support the UK economy, which is expected to bounce back more slowly than expected this year.
The Office for National Statistics (ONS) now expects the UK economy to grow by 4% in 2021, down from the 5.5% forecast in November, with GDP growth of 7.3%, 1.7%, 1.6% and 1.7% in the four years that follow respectively.
According to the ONS, the UK economy fared better than expected in 2020, falling by -9.9% compared to -11.3% forecast in November.
The government’s overall Covid-19 support package will be £352bn over 2021 and 2022, totaling at £407bn when including last years’ measures.
The Chancellor confirmed a £5bn restart grant to help businesses continue to trade as they come out of lockdown restrictions, bringing total cash support to £25bn.
With the government-backed bounce back loan and coronavirus business interruption loan scheme coming to an end, the Treasury is also launching a new loan scheme. It will run until the end of the year, and loans will be provided at the value of between £25,0000 and £10m.
The 5% reduced rate of VAT for hospitality, accommodation and attractions will be extended until the end of September, at which point it will be gradually increased.
It will increase to 12.5% for six months, before returning to the standard rate from April next year.
Elsewhere, £700m will be handed to arts, culture and sports, with the Government set to support the proposed England-Republic of Ireland 2030 FIFA World Cup bid.
Under original plans, this was due to end at the end of March. However, the budget announced that the emergency stamp duty nil-rate band (NRB) will be extended until 30 June and gradually reduce the threshold thereafter.
The £500,000 NRB will now be available until 30 June, and £250,000 until September. It will return to its normal £125,000 level on 1 October. ‘Due to the sheer volume of transactions we’re seeing, many new purchases won’t complete in time for March,’ Sunak said.
Sunak also announced a new policy “to stand behind homebuyers” with the Treasury offering mortgage guarantee for those who can only afford a 5% deposit.
The Chancellor said he expects 95% mortgages to be offered by a number of banks from next month, with the aims of “turning generation rent into generation buy”.
Self-Employment Grants and Furlough Scheme Extended to September
The new extension to the Coronavirus Job Retention Scheme (CJRS), applied to the whole of the UK, will cover 80% of wages for those not working due to the pandemic. However, employers will be expected to make a “small contribution of just 10%” towards payments to CJRS from July, rising to 20% in August and September as government support tapers off and focus shifts to reopening the economy.
“For employees, there will be no change to the terms. They will continue to receive 80% of their salary for hours not worked until the scheme ends. As businesses reopen, we will ask them to contribute alongside the taxpayer to the cost of paying their employees,” Sunak told the House of Commons.
The Self-Employment Income Support Scheme (SEISS) is set to continue through to the end of September in the form of a fourth and fifth grant.
SEISS’ fourth grant may be available to 600,000 people more than the third grant, with individuals having to file a 2019-20 Self-Assessment tax return to be eligible for this grant, offering the potential for the newly self-employed to qualify.
A fifth and final SEISS grant will cover the period May to September, with the value of grant determined by a “turnover test” to “ensure that support is targeted at those who need it the most”.
Individuals whose turnover has fallen by 30% or more will receive the full grant of 80% of three months’ average trading profits, capped at £7,500, while those whose turnover has fallen by less than 30% will only be eligible for a 30% grant, capped at £2,850.
This can be claimed from late July, with further details to be published “in due course”.
Corporation Tax hiked to 25% from 2023
The current rate is 19% and companies with profits below £50,000 p.a. will continue to pay this rate. The government will taper the rate for firms with profits between £50,000 and £250,000 so that only companies with profits above this will be taxed at the higher 25% rate. “That means only 10% of all companies will pay the full higher rate,” said Sunak.
The VAT registration threshold will remain at £85,000 until 2024.
- The Personal Allowance and Higher Rate Tax threshold will increase to £12,570 and £50,270 respectively in April before being frozen until 2026
- The ISA allowance will remain at £20,000
- The Junior ISA and Child Trust Fund allowance will remain at £9,000
- There was no mention of the reduction to the Lifetime ISA early withdrawal charge so this will return to 25% in April
- Lifetime Allowance to be frozen at £1,073,100 until April 2026. It had previously been expected to increase to £1,078,900. The move is expected to net the Treasure an extra £250m p.a. in LTA Charges or close to £1bn in total
- The inheritance tax nil rate band will remain at £325,000 and Residence Nil Rate Band at £175,000 until 2026. The nil rate taper will also remain at £2m.
- The annual exempt amount for Capital Gains Tax (CGT) will be frozen at £12,300 p.a. for individuals and £6,150 p.a. for trusts until 2026. This is expected to raise £65m.
Savers will be offered the chance to invest in the UK’s push to net-zero after the chancellor, Rishi Sunak, announced the introduction of country’s first green bond.
Sunak said: ‘In November I announced we would launch a world leading sovereign green bond. Today we’re going further announcing a new retail savings product to give all UK savers the chance to support green projects.’
The Treasury said further details would be announced in the coming months before the product goes on sale later this year.
The chancellor also announced plans to establish a UK infrastructure bank, which will receive £12bn in initial funding to support a ‘green industrial revolution’.
Headquartered in Leeds, it will work with both the private sector and local government to develop projects, with one of its first investments being new port infrastructure in Humberside to support offshore wind energy.
Treasury documents released after the Budget speech confirmed the government is also planning for at least £15bn of green gilt issuance in the coming financial year, to help finance critical projects to tackle climate change and other environmental challenges, fund important infrastructure investment, and create green jobs across the UK.
The (DWP) has forecast a payment of £3bn over the next six years to address underpayments of the state pension to women dating back two decades.
Published on Wednesday (3 March), the Office for Budget Responsibility Economic and Fiscal Outlook said the DWP had identified “underpayments of state pension relating to entitlements for certain married people, widows and over-80s back to 1992”.
In February 2020, LCP partner and former pensions minister Steve Webb tabled an FOI inquiry to DWP which revealed large numbers of women were getting state pensions below the expected rate, and subsequent campaigning revealed other groups of women including widows and the over 80s who may also have been affected.
The underpayment affected married women whose husbands reached pensionable age before 2008 and who were unknowingly entitled to ‘enhanced pension’ that would have boosted their payments by up to 60%.
Other big changes
- The higher rate of Universal Credit, which was boosted by £20 a week during the pandemic, will stay at the higher level for the next six months
- National minimum wage will increase to £8.91 an hour from April for workers aged 23 and over
- Struggling business in the leisure and retail sectors were thrown a £5bn lifeline in the form of restart grants of up to £18,000 per premises to help companies reopen when lockdown restrictions are lifted
- Businesses will be able to take advantage of a ‘super deduction’ that allows them to claim back 130% of money spent investing in the company, such as purchasing equipment
- A total of £700m was set aside to help reinvigorate the arts, culture, and sports sectors, including the country’s bid for the 2030 World Cup
- Planned rises in duty on spirits, wine and beer have been cancelled
- Planned increases in fuel duty have also been cancelled