When Chancellor of the Exchequer Rishi Sunak presented his first budget on 11 March 2020 no one could have predicted the financial disruption the country was about to face from Covid-19. The budget he presented on earlier this week, as might be expected, was very different and designed to repair the economic damage caused.
The pandemic has had a significant impact on both a social and economic level. In this budget the government committed to continuing, unprecedented support for those in need- both the British people and businesses. This has meant that the government has had to borrow heavily, an eye watering amount of over £350bn with over £60bn more to come. This will clearly have to be paid back, but probably over a significant period of time.
As we all know, it’s the Chancellor’s job to balance the books for UK PLC, and the budget is where he sets out his plan to strengthen the UK economy. Wednesday’s budget was uniquely different to usual budgets and direction to accommodate the unprecedented situations the economy faces as a direct result of Covid-19. In his budget speech he stated that he wanted to “protect the jobs and livelihoods of British people”.
As a backdrop, he expects the economy to get back to pre Covid levels by the middle of next year, that’s a 6 month improvement on the last forecast, all down to the success of the vaccine programme. And he expects unemployment will peak at 6.5% which is much better than the 11% peak previously expected. So, in short, we still have a painful times ahead and we are not out of the woods yet, but we have a lot to be hopeful for if we can get the vaccines to everyone as quickly as possible, and another £1.6bn was pledged to help do just that.
To support everyone during the still very fragile time until mid-2022, some of the more prominent budget headlines included:
Furlough was extended until September, with employees continuing to receive 80% of their salary with businesses contributing increasingly from July
The self-employed will continue to receive grants until September and access to this money will be improved, 600,000 more will be eligible
Business Restart grants will be available to businesses from April to help those business who felt they had to shut permanently, to ‘get going again’
The Business Recovery Loan Scheme will be available until the end of the year, part backed by the government
The Business Rates holiday for retail, leisure and hospitality will continue to the end of June
Reduced VAT rate for Hospitality & tourism extended until end of September
The Corporation Tax Rate is unchanged until April 2023, but at that time it will increase significantly for bigger businesses
There was no raise to income tax, NI or VAT
However there was a freeze on personal tax thresholds, which means as peoples’ salaries increase, some will cross the threshold and incur higher rates
There was no increase in this budget on the Inheritance tax threshold, the pensions lifetime allowance, or the annual exempt amount in Capital Gains Tax
These summarised points are just a few of the key headlines from the budget. It’s worth delving into the detail to learn more about the wider implications for you and your business and use some of the calculators available to see what these budget announcements fully mean for you and your customers.
Despite the significant economic stimulus in the budget to support consumers and businesses, the government have made it clear that the roadmap for unlocking the country will not be speeded up by the need for a better economic performance. We will keep a watching brief on all of the developments so we can best navigate through these tough times, supporting our partners and customers.