Rishi Sunak delivered his 2021 Budget after spending a year giving money away. Making him one of the most popular Chancellors the country has had. However, the budget has marked a turning point for the Chancellor. While he has continued some giveaways, he has also highlighted that pain is to come.
2021 Budget – Main Headlines
The main headlines were of tax breaks for companies and a continuation of the Covid-19 support packages that were in place. This includes more tax in the future, though. The timings were presented as a recognition that the economy needed more support to recover from the effects of coronavirus, but also needed to be reassured that everything would eventually be paid for. More generally the measures represented a gradual withdrawal of support, rather than some of the cliff edges that had been in place under previous schemes where the support would simply end.
Businesses looking for support as they got back on their feet would have been pleased with some 2021 Budget measures. The super deduction has been one of the most widely publicised. The super deduction offers a 130% tax deduction for business investment and is expected to increase business investment spending by around £20 billion in the first year. The business rate holiday has been extended. This will be particularly welcomed by many businesses for whom excessive business rates had become their main overhead. And hospitality businesses will be helped to return to full trading by a retention of the 5% VAT rate.
Individuals also has some good news in the 2021 Budget. Those furloughed from their job got some more breathing space with the extension of the furlough scheme. And many self-employed will benefit from an extension of the grant scheme to compensate for lost earnings. While those thinking about moving home will be pleased to see the stamp duty holiday continued. The 95% mortgage scheme has made it easier for people to own their homes or move somewhere bigger.
However, the pain was definitely there, even if postponed. It might have been the 2021 Budget, but it contained plenty of announcements for future years. Businesses might have a few treats now, but those making over £50,000 profit a year will see their tax rates increased to 25%, with those earning less on a tapered increase. It was also announced that income tax allowances would be frozen for five years, effectively meaning consecutive tax rises for tax-payers.
As always, the changes will make the tax situation more complicated over the next few years. Perhaps most affected will be those small business owners who may have to reconsider how they make their company and personal situation as tax-efficient as possible. Meanwhile, many businesses will have to consider if and how they should take advantage of schemes like the super deduction and how to manage the end of furlough, when they will be expected to make a contribution to salaries.
Sunak believes that his measures are necessary to re-start the UK economy. Whatever your situation, you will need to be careful as all the changes come into force.
Connect with us!
Read more of our blog.