Budget 2021 At a Glance

Chancellor Rishi Sunak has unveiled the contents of his Budget in the House of Commons.

Developing government revenue and expenditure policies for the next year, he proposed new policies to protect businesses and employment during the pandemic and to support the UK’s long-term economic growth and a number of tax-raising plans to further rebalance public finances.

Here’s a list of the main points:

COVID-19 Support

• Furlough to be extended until the end of September
  Government to continue paying 80% of workers’ salaries for hours they are unable to work
  Employers are required to contribute 10% in July and 20% in August and September.
• Support for self-employed workers is also to be extended until September
• 600,000 additional self-employed individuals will be available for assistance as access to funding is extended.
• £20 a week of the universal credit value of £1,000 a year to be extended for another six months.
• Working Tax Credit Applicants will get a one-off payout of £500
• The minimum wage to be increased to £8.91 per hour from April.

State of  the Economy and Public Finances

• The UK economy decreased by 10% in 2020.
• The economy is estimated to recover in 2021, with an expected average growth rate of 4 per cent this year.
• The economy is expected to return to pre-Covid peaks by mid-2022, with an expansion of 7.3 per cent next year.
• 700,000 people have lost their jobs since the onset of the pandemic
• Unemployment is estimated to peak at 6.5 per cent next year, smaller than 11.9 per cent originally forecast.
• The United Kingdom has to repay a peacetime high of GBP 355 billion this year.
• Borrowing to a total of GBP 234 billion in 2021-22.

Taxation

• No changes to the rates of income tax, national insurance or VAT-free personal pension to be fixed at £12,570 from April 2021 to 2026
• Higher-income tax level to be frozen at £50,270 from April 2021 to 2026
• Corporation tax on corporate income in excess of £250,000 is expected to increase from 19 per cent to 25 per cent in April 2023.
• Rate to be held at 19 per cent for about 1.5 million smaller businesses with earnings of less than 50,000 pounds.
• Stamp duty holiday on home sales in England and Northern Ireland extended to 30 June.
  No sales tax on less than £500,000
• Inheritance tax rates, investment life allowances and annual capital gains tax deductions to be frozen at 2020-2021 rate until 2025-26.

Health and Education

• £1.65 billion to help the UK vaccination roll-out and £50 million to improve the UK vaccine monitoring capability
• £19 million for domestic abuse programmes, grants for the network of shelters for homeless people
• £40m in additional funds for veterans of the 1960s Thalidomide crisis and life support pledge
• £10m to help members of the armed forces and mental health needs

The Arts and Sports

• Nearly 400m to support art venues in England, including museums and galleries, re-open a kit of 300m for professional sport and 25m for youth football.
• £1.2m to help stage the Women’s Euros soccer championship in England postponed in 2022.

Business, Digital and Science

• Tax cuts for companies to “unlock” £20 billion worth of private spending
• Firms would be entitled to “deduct” spending charges from tax bills, lowering taxable gains by 130 per cent.
• Incentives for employers to take on apprenticeships to increase to £3,000 and £126m for traineeships
• The lower VAT limit for hospitality companies to be held at a rate of 5% until September
• The interim 12.5% rate will then extend over the next six months.
• Business vacation prices for companies in England to begin until June with a 75% discount after that date.
• £ 5 billion in Restart funds for shops and other companies in England forced to shut.
• £6,000 per premises for non-essential shops set for re-opening in April and £18,000 for gyms, personal care services and other accommodation and leisure companies.
• New visa scheme to help start-ups and quickly rising tech companies bring expertise from overseas
• The contactless payment limit will increase to £100 later this year.

Alcohol, Tabacco and Fuel

• All duties on alcohol to be frozen for the second year running
• No extra taxes on spirits, wine, cider or beer.
• Fuel obligation to be frozen for the eleventh straight year;
• Tobacco duties increased in November, but there was no further increase in this budget.

Environment, Transport, Infrastructure and Housing

• New UK Infrastructure Bank to be founded in Leeds.
• It would have a portfolio of £12 billion to finance £40 billion worth of public and private ventures.
• $15 billion in renewable bonds, from institutional buyers, to help fund the transition to net-zero by 2050.

Nations and Regions

• £1.2 billion in grants to the Scottish Government, £740 million to the Welsh Government and £410 million to the Northern Ireland Executive with 750 UK civil servants to move to the new Treasury Campus in Darlington.
• £1 billion to support redevelopment in another 45 English cities, including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich.
• £150 million for voluntary organisations to take on pubs at risk of closing.
• The first eight locations for freeports in England have been announced: Felixstowe and Harwich, Humber, Liverpool City, Plymouth, Solent, Thames and Teesside.

How does it affect Common people?

You might not think it, but the Budget does affect your life.

The Chancellor may decide to spend more or less money on schools, and may also want to spend money on youth schemes in your city.

Adults could find that they have more or less money to spend-which might mean more or less pocket money for you!

Any aspects of the budget, such as defence expenditures, concern the entire United Kingdom.

Others, such as education, have only an impact on England. That is how Scotland, Wales and Northern Ireland are making their own choices.

The new threshold is for employers and self-employed workers to pay contributions until they receive £166 a week, equal to an annual wage of £8,632 a year. You start paying back from April when you receive £9,500.

This would mean that 500 000 households will no longer have to pay this levy, according to independent economists at the Institute for Fiscal Studies (IFS).

Many that still pay will save up to £85 a year on average. The Chancellor said that it would be just over £100 a year, but the figure does not cover self-employed staff.

The IFS claims that 8 per cent of the earnings go to the lowest 20 per cent of working families, meaning people with a good wage will benefit the most. However, those employed in a variety of low-paid part-time positions could see a substantial rise in their home wages.

Another levy that needs to be reduced is VAT on digital books, newspapers and magazines.

UK workers have now begun to receive mandatory sick leave on the first day of work to help contain coronavirus. This is borne by the company, but smaller enterprises with less than 250 workers will recover the expense of paying sick wages for 14 days of isolation.

Those who are not entitled to sick leave, in particular self-employed workers, would be allowed to receive an Employment and Support Allowance (ESA) from day one of “illness” rather than day eight.

ESA shall be paid to those who are too ill to serve, provided that they fulfil such requirements. It’s worth £73.10 a week or £57.90 for the under-25s. The complexity of this advantage will suggest that this move is unlikely to affect a large number of people.

However, the Conservative government is believed to be able to abolish the extra tax relief applied by self-assessment as well as potentially lower the overall higher amount of tax relief on pension payments.
At present, it is possible to apply tax exemption to private pension payments of up to 100 per cent of the individual’s income, including an additional tax-free credit of £40,000. However, this is expected to change with lowered allowances for those with a threshold wage of more than£200k or with an adjusted income of£240k.