• Pem Paddick

Budget 2021



My Initial understanding around The Chancellor of the Exchequer Rishi Sunak 2021 Budget. Some welcome and expected extensions to current schemes and more time given to plan through the upcoming road map allowing business’s time to consider current challenges but to also to give a little breathing space where possible.


The Job Retention (furlough) Scheme (Furlough)

  • Furlough scheme has been extended from its original deadline of the end of April until the end of September 2021. We know from Boris’ previous four step announcement that whilst we’re looking at society potentially re-opening on 21 June, social distancing is set to remain in place until at least 4 September. Presumably, this is to assist organisations in gradually working towards pre-pandemic normality whilst also allowing for any delays to England’s roadmap out of lockdown that may occur if the government’s tests for easing restrictions, at any stage, are not passed.

  • In terms of the extended furlough scheme -from July, employers will be expected to pay 10% towards the hours staff don’t work, increasing to 20% in August and September, similar to the way they started to phase it out last year before it was extended at the end of October. (From July 2021, the government will contribute 70 per cent of wages for unworked hours, with organisations asked to provide the remaining 10 per cent. In August and September 2021, they will contribute 60 per cent, meaning organisations must provide 20 per cent.)


The National Living Wage will be increased to £8.91 from April

  • The government has confirmed that they will be accepting all recommendations from the Low Pay Commission. This news comes despite earlier rumours that the minimum wage would be frozen. Crucially, the National Living Wage will increase by 2.2 per cent. It will also be extended to those aged 23 and 24 for the first time, meaning those in this age bracket will see their salaries increase by nearly 9 per cent.

  • Here are the old v new amounts below -

o National Living Wage (23+) £8.72 £8.91 - 2.2% increase

o 21-22 Year Old Rate £8.20 £8.36 - 2.0% increase

o 18-20 Year Old Rate £6.45 £6.56 - 1.7% increase

o 16-17 Year Old Rate £4.55 £4.62 - 1.5% increase

o Apprentice Rate £4.15 £4.30 - 3.6% increase

o Accommodation Offset £8.20 £8.36 - 2.0 increase

  • If you are a business that pays minimum wage you should already be planning for the increase to you payroll and have sent letters to your staff confirming the change of rate and Salary effective 1st of April.

  • If you employ temporary staff the Agency Workers and pay minimum wage you need to account for the increase in costs.


Other changes

  • There will also be a six-month extension of the £20 per week Universal Credit uplift, with eligible Working Tax Credit claimants receiving a one-off payment of £500.

  • Income tax personal allowance and the higher rate threshold will rise next year as planned and will then be maintained at that level until April 2026.

Training and Recruitment

  • Two new training schemes will help small businesses to become more productive.

  • They are:

Help to Grow Management – offering world class management training with mentoring and with the Government covering 90% of the cost; and

Help to Grow Digital – offering small firms free training and 50 per cent discount on software.

  • Enrolment for both will be open in the near future.

  • Employers taking on new apprentices of any age will see the incentive payment double to £3000 and £7 million will be made available for a new “flexi-job” apprenticeship programme in England, which will enable apprentices to work with a number of employers in one sector.

  • The Home Office will be announcing ambitious visa reforms to allow the best talent in science, technology and innovation to come from around the world to work in the UK.

Grants & Loans

  • Direct cash grants to come to an end in March for businesses

  • A new restart grant will be available in April to help the businesses re-opening first with grants of £6000. The later ones such as gyms, as they will face more problems, will get £18,000.

  • In addition, £700 million will be made available to help the creative sector to re-start.

  • Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.

  • There is also good news for the self-employed as well, with the widening of the grant criteria, some 600,000 more people will now be eligible for government support. From April, a fourth grant from the Self-Employed Income Support Scheme will be made available to claim for those eligible. This will be worth 80% of three months' average trading profits up to £7500. The fifth grant covers the period May to September 2021. The Chancellor announced that this will be a reduced grant for self-employed individuals whose fall in turnover was less than 30% in the previous financial year.

  • The grant is worth:

o 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more

o 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%

  • The rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.

Rates, Tax and Mortgages

  • The 100 per cent business rate holiday will continue through until June, with a two-third discount for rest of the year.

  • The 5 per cent reduced rate of VAT for hospitality, accommodation and attractions across the UK will be extended to the end of September and will only return to normal levels in stages, starting with 12.5 per cent until 31 March 2022.

  • The Stamp Duty relief level of £500,000 will be extended to 30 June when the nil rate band will double until the end of September.

  • A new Mortgage Guarantee scheme will provide help for those with just 5% deposits meaning 95 per cent mortgages on offer from April.

Duties

  • Planned increases in duty on spirits, wine, beer and fuel duty are all cancelled.


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