The UK budget is always keenly anticipated, but with the Coronavirus pandemic still raging on this year’s budget is particularly important to the millions now reliant on government support. As of February 2021, over 11 million people have been furloughed at some point – and the government estimates as many as 4.7 million still remain furloughed as of January 2021. Beyond the furlough, tens of thousands of businesses are looking to see what support will be offered to them, as many sectors including hospitality remain entirely closed. We dissect what was in this week’s budget.
The furlough scheme has been extended until September, with the government continuing to pay 80% of the employees’ wages. From July employers will have to contribute in 10% of this, rising to 20% in August. The Self-Employed Income Support Scheme (SEISS) has also been extended with a fourth and fifth grant, which is now available to as many as 600,000 people who became self-employed in the period 2019-20.
Business rate holidays have likewise been extended by an additional three months. Tourism and hospitality have been hardest hit by the lockdown, with government figures suggesting that 1.15 million remain furloughed in food services and accommodation sector alone. Therefore, the temporary 5% VAT rate reduction for hospitality and tourism has been extended to September 2021, with a transitional 2.5% VAT rate reduction to be in place for a further six months, until 31st March 2022.
Highstreet shops which have been heavily impacted by the shutdowns will be eligible for 5 billion in new grant funding, with a cap of £18,000 per business. This 5 billion comes on top of the 25 billion the government has already granted to highstreet businesses. Alongside this, the government is creating a new Recovery Loan Scheme, which aims to offer businesses of any size guaranteed loans up to the value of £10 million per business.
Apprenticeships are also set to see a boost, with £126 million allotted to create 40,000 new apprentice roles, with participating firms receiving a cash incentive of £3000 per hire. Alongside this the minimum wage has been raised to £8.91 an hour from April, and the additional £20 a month granted to those jobseekers receiving Universal Credit will now remain in place for an additional six months. It was previously speculated that UC claimants could have received a one time £1000 payment.
Funding the vaccine programme:
The UK’s vaccine programme has shaped up to be one of the most efficient in the world, with over 20 million people having received at least one dose of the Coronavirus vaccine. Germany by comparison has vaccinated only 6.8 million people. Questions however remain about the UK’s implementation of the second dose of the vaccine and ensuring a smooth rollout of the vaccine is likely the government’s number 1 priority at the moment.
It has therefore been announced that an additional £1.65 billion will be allocated to the vaccine rollout, with £50 million earmarked to further testing of the vaccine.
The housing market has paradoxically seen somewhat of a boom as working from home and the pandemic drives demand for more rural properties, and the stamp duty holiday accelerates home sales. For those looking to get on the property ladder however, these have been uncertain times, and the government therefore has announced a new mortgage guarantee scheme that will enable homebuyers to acquire a mortgage of up to £600,000 with only a 5% deposit as well as extending the stamp duty holiday to September.
It has also been announced that the contactless card payment limit will rise from £45 to £100 later on in the year, in an effort to keep cash transactions which could spread Covid-19 down to a minimum. This is an acknowledgement that contactless payment remains the most Covid-secure way to pay and brings into sharp focus the need for businesses to be able to accept card payments. If your business is looking to accept card payments, take a look at our available solutions here.
Footing the bill:
Not all news from the budget was a relief, however. The enormous costs incurred by the government for these programmes will inevitably have to be paid back, and as part of a move towards this, the income tax personal allowance while rising as planned next year, will be frozen thereafter until 2026.
Additionally, corporation tax will rise – increasing from 19% to 25% on businesses with profits exceeding £250,000. Below £50,000 no change in rate will be applied, and those firms with profits between £50,000 and £250,000 will be taxed at an incrementally increasing rate. This thinking seems in line with previous mooted proposals such as an online sales tax and is unlikely to be the full extent of the book balancing necessary in the post-Corona world. We will bring further analysis as the economic situation develops.