The Chancellor, Rishi Sunak, has released the details of the Government’s 2021 Budget which consists of a number of financial support measures for businesses, employees and self-employed workers through the pandemic and to assist the UK economy’s long-term recovery.
Below, we have provided a summary of the measures:
Coronavirus Job Retention Scheme (CJRS) (also known as the furlough scheme)
As anticipated, the CJRS – which pays 80% of workers’ wages for hours they are not able to work – has once again been extended, this time until the end of September 2021.
The scheme will continue to pay 80% of employee’s wages until the end of June (up to a monthly cap of £2,500 per employee). The financial support from the Government will then reduce from July until the scheme ends in September, with employers paying:
- 10% towards their employees’ wages in July (with the Government paying 70%); and
- 20% in August and September (with the Government paying 60%).
As has previously been the case, employers will continue to be responsible for paying National Insurance (NICs) and pension contributions.
Self-Employment Income Support Scheme (SEISS)
The Government has also announced that the SEISS grant has been extended up until September 2021. The scheme, which permits self-employed people whose business and income have been impacted by Covid-19 to claim money from the Government, will provide two further payments (fourth and fifth grants).
The fourth grant will cover February until the end of April 2021, and will pay up to 80% of trading profits (on average over the three month period) up to £7,500 in total. Claims for the fourth grant can be made from April.
The fifth grant amount covers a four month period (May to September 2021) but this payment will be based upon loss of income, as follows:
- Those whose turnover has dropped by at least 30% will still be able to apply for a grant for up to 80% of profits, up to a value of £7,500.
- For those whose turnover has reduced by less than that, they will be able to apply for up to 30% of trading profits (capped at £2,850).
Claims for the fifth grant can be made in July.
Those who have previously claimed via the SEISS will be able to do so again, as will an estimated 600,000 self-employed people who previously weren’t able to as they were not able to demonstrate their self-employed status on their tax return.
In order to claim the grant payments, self-employed individuals will need to have completed tax returns for the 2019/20 financial year in order to qualify, based on the provision that they filed their tax return by the end of the day on 2nd March 2021.
National Living Wage
It has also been confirmed that the minimum wage for workers in England will increase as from 1st April 2021. This increase will mean that those:
- Aged 23 and above will see their pay increase to £8.91 an hour (previously this highest National Living Wage was only available to those aged 25 and over)
- Aged 21 to 22 years of age will receive £8.36 an hour
- Aged 18 to 20 years of age will receive £6.56 an hour
- Aged 16 to 17 years of age will receive £4.62 an hour
- Apprentices will receive £4.30 an hour
It has also been confirmed that the £20 weekly increase for Universal Credit will continue for another six months, and that those claiming work tax credit will receive equivalent support via a one-off payment of £500.
Tax and VAT
During the Budget, it was confirmed that there will be no changes to income tax, national insurance and VAT.
The personal income tax thresholds before tax has to be paid will, however, be increased next year (April 2022) with:
- The threshold for paying the basic rate increasing to £12,570; and
- The threshold for higher-rate payers changing to £50,270.
Both amounts will remain the same until 2026.
The Chancellor has also announced an increase to corporation tax on company profits from 19% to 25% in April 2023. For smaller businesses with trading profits of less than £50,000, the corporation tax rate will remain at 19%.
There will be no changes to inheritance tax, the lifetime pension allowance or capital gains tax allowance.
Other key Budget announcements for businesses and workers to be aware of
- There will be a rollout of two new Help to Grow schemes for SMEs which will provide access to management training, technology advice and discounted software to improve productivity.
- The introduction of a new Recovery Loan Scheme which will offer companies (of all sizes) loans ranging from £25,001 to £10 million per business. The scheme will launch on 6th April 2021 and full details will be available in the next few weeks.
- Restart grants will also be rolled out next month. This will mean that retail organisations will be able to claim up to £6,000 per premises, while hospitality and leisure businesses, including personal care and gyms, will be able to claim up to £18,000 per premises.
For further details of the Budget, please click here.