Autumn Budget 2021 Summary and Highlights
The Office for Budget Responsibility (OBR) anticipates that the UK’s economic recovery will be “swifter and more sustained” due to the accelerated COVID-19 vaccine programme and predicts the UK economy will grow by 4% in 2021, rising to 7.3% in 2022. It expects the economy to return to its pre-pandemic size six months sooner than previously forecast, by mid-2022.
Wages
Minimum wage for over-23s to rise from £8.91 to £9.50 an hour in April 2022
Minimum wage for 21-23s to rise from £8.36 to £9.18 an hour
Minimum wage for 18-20s to rise from £6.56 to £6.83 an hour
Minimum wage for 16-17s to rise from £4.62 to £4.81 an hour
Apprentice rate to rise from £4.30 to £4.81 an hour
One-year public sector pay freeze to end for 5.5million workers - but no guarantee wages will rise above inflation or departments will get new money to fund them.
Tax
National Insurance Contributions on pay over £9,568 rise from 12% to 13.25% from April 2022. £24k earners pay £180 extra per year and firms contribute too
Benefits
Universal Credit taper rate cut from 63p to 55p letting 1.7million Brits keep more as they earn by December 1 at latest
Universal Credit work allowance raised by £500 a year - letting workers with kids or disabilities keep more of their benefits - by December 1 at the latest
But it comes weeks after £20 cut - and around 3million on the benefit won't see a penny of the increase
COVID-19 Support
The Chancellor’s Budget 2021 included a string of extensions to the Government’s existing COVID-19 support packages, along with a handful of new schemes and incentives aimed at protecting the jobs and livelihoods of the British people. Despite broadening the scope of eligibility for the Self-Employment Income Support Scheme (SEISS), the Budget provided little comfort for the ‘forgotten millions’ of freelancers and limited companies that continue to fall through the cracks of the SEISS and the Coronavirus Job Retention Scheme (CJRS).
Self-Employment Income Support Scheme
The fourth SEISS grant, covering February to April, will be paid in line with previous SEISS grants at 80% of average trading profits, up to a maximum of £2,500 a month.
A fifth and final SEISS grant, covering May through September, will see the tapering down of Government support, focusing largely on those still most affected by the pandemic. Individuals who’ve seen turnover fall by 30% or more will continue to receive 80% of three months’ average trading profits, up to £7,500 cap. Where turnover has fallen by less than 30%, then the grant received will only be 30% and this will be capped at £2,850.
Individuals who were newly self-employed in the 2019/20 tax year were unable to receive the first three SEISS grants. However, since the deadline for 2019/20 self-assessment tax returns has elapsed, the Chancellor is making this demographic eligible for the fourth and fifth SEISS grants.
Furlough Scheme
The Coronavirus Job Retention Scheme (also known as the furlough scheme) has been protecting over 11 million jobs since the first nationwide lockdown in March 2020. The furlough scheme was due to close at the end of April 2021 but the Chancellor has opted to extend it until the end of September. Employees will continue to receive 80% of their current salary for hours not worked.
Crucially, employers will be required to pay 10% towards the hours their employees cannot work in July, followed by 20% in August and September. This is in addition to the employer's national insurance and pension contributions they are already paying on hours not worked by employees.
Another key announcement was that eligibility for claiming under the furlough scheme will change from 1st May 2021. From that date an employer can claim for those who were employed on 2nd March 2021, as long as an PAYE RTI submission was made between 20th March 2020 and 2nd March 2021, notifying a payment of earnings for that employee.
Recovery Loan Scheme
With the final application dates for support under the Coronavirus Business Interruption and Bounce Back Loan Schemes being 31st March 2021, eligible UK businesses will welcome the announcement in today’s budget of a new Recovery Loan Scheme (RLS).
UK businesses of any size can apply for loans or overdrafts from £25,000 to a maximum of £10 million until the end of this year. Invoice and asset finance will also be made available to provide finance worth between £1,000 and £10 million. Finance under the new scheme will be backed by an 80% Government guarantee to encourage banks to continue to lend confidently.
VAT for hospitality, holiday accommodation and attractions
The reduction in VAT to 5% for the UK’s tourism and hospitality sector has been extended until 30th September. After this period, VAT for these sectors will rise to 12.5% for a further six months, before returning to the standard rate of 20% from April 2022. The Chancellor believes this VAT commitment will support 150,000 firms in the hospitality and tourism sector who employ over 2.4 million people.
Stamp Duty Holiday
The stamp duty holiday in England and Northern Ireland has been extended until 30th June, enabling the huge backlog of transactions to complete before midsummer. Stamp duty land tax (SDLT) remains suspended on the first £500,000 of all property sales.
Beyond 30th June 2021, the nil rate threshold for SDLT will be set at £250,000 until 30th September 2021 before returning to its usual threshold of £125,000 on 1st October 2021.
Mortgage Guarantee Scheme
The Chancellor also confirmed the launch of a new low-deposit mortgage guarantee scheme, ushering in a new wave of 95% loan-to-value (LTV) mortgages. Since the onset of the coronavirus crisis, most mortgage lenders have been reluctant to offer mortgages worth more than 90% LTV, requiring buyers to save deposits of at least 10%.
The Government-backed scheme provides certainty to lenders to broaden their eligibility criteria to buyers with only modest deposits.
The new 95% mortgages available under the Mortgage Guarantee Scheme will be available on properties up to a value of £600,000.
Under the scheme all buyers will have the opportunity to fix their initial mortgage rate for at least five years should they wish to. The scheme, which will be available for new mortgages up to 31st December 2022, will increase the availability of mortgages on new or existing properties for those with small deposits.
Taxation
The Chancellor has committed to continue to support the UK recovery but has also taken steps to balance the books and reduce the record deficit spending.
Individuals will be hit with a freeze on many allowances and personal tax rate bands.
While companies will not welcome the increased rate of corporation tax to 25%, there will be sighs of relief that it is not effective until April 2023. Smaller companies will benefit from a new Small Profits Rate and it is expected that only 10% of companies will pay the new higher rate of 25%.
Businesses will also need to plan so they make maximum use of the new loss carry-back rules and a new temporary super-deduction for qualifying capital expenditure, which is available for companies.
We have highlighted below some of the main changes for individuals, companies and small business.
Individuals
Income Tax Personal Allowance and the basic rate limit
The Personal Allowance and basic rate income tax limit are to be frozen at their 2021/22 levels for the next five years (up to and including 2025/26).
The Government intends to set the Personal Allowance at £12,570, and the basic rate limit at £37,700.
The point that you start to pay higher rate tax, known as the higher rate threshold (the Personal Allowance added to the basic rate limit) will therefore be £50,270 for these years.
The National Insurance Contributions Upper Earnings Limit and Upper Profits Limit will remain aligned to the higher rate income tax threshold at £50,270 for these years.
Companies and Small Businesses
Corporation tax
Corporation tax rates are to set rise from 19% to 25% in April 2023. The Government will introduce a new Small Profits Rate of 19% for companies with annual profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate of 25% reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
Help to Grow Scheme
As part of the Chancellor’s vision for an investment-led recovery, the new Help to Grow scheme will provide industry leading support to growing businesses. The Help to Grow Management programme will offer world-class management training via business schools, with the Government contributing to 90% of training costs. Meanwhile the Help to Grow Digital programme will provide free expert training and will be delivered by a combination of a voucher covering up to 50% of approved software costs up to a maximum of £5,000 with free online impartial advice.