Moose summary of the Budget 2021
As Rishi Sunak sets out his plans for financial recovery, we explain the key measures in the 2021 Budget and the help being offered to businesses and the self-employed. These include new allowances, tax cuts, the self employment scheme and help for the hospitality and arts sectors.
Last week’s budget announcement was a safe move in our opinion, with a focus on macroeconomics rather than leveraging tweaks to our taxation system.
Arguably the Chancellor has done enough for the short term but we still want to know:
- Where is the growth of post-pandemic and post-Brexit Britain going to come from?
- Where is the ambition for investment?
- Where is the plan for environmental policy?
- Where is the discussion on carbon pricing?
The £12bn Infrastructure and the extension of the Future Fund to the sum of £435m is a drop in the ocean when compared to private market funding. The Conservatives, as ever, are letting market economics dictate our recovery but they appear to have no other choice.
Microeconomics has been left for another day but, politics aside, whoever was in charge means that we’ll be paying for COVID-19 for generations to come.
The following is a breakdown of the headlines from the budget.
- Furlough extended
- £35bn committed to keep people employed until September 2021, continued cuts to VAT and business rates.
- The 80% continues to July 2021, where companies will again be weaned off of the scheme to its conclusion later this year.
- The upside is that the OBR predicts a peak unemployment of 6.5% as opposed to 12% that it initially forecast.
- Help for Hospitality
- Arguably the hardest hit of all sectors and we all have a vested interest that it survives.
- The VAT reduction to 5% continues to September 2021 then capped at 12.5% to April 2022.
- Restart grants will be made available – £6,000 for non-essential retail and £18,000 for restaurants, bars, hotels, hair salons, gyms and other businesses forced to close.
- Recovery Loans
- The loan scheme continues but back to more commercial rates of lending that will assist in recovery.
- Capped at loans of up to £10m, with personal guarantees likely, small business groups such as Enterprise Nation said that the scheme lacked “a plan to reduce small business dependency on handouts and getting into debt.”
- Corporation Tax & Super Deductions
- Moose clients and around 70% of businesses will be unaffected by the rise and the introduction of Super Deductions will help incentivise investment today.
- From £50k to £250k the rate of tax will be tapered i.e. staggered to a maximum of 25%.
- The 2023 Corporation tax increase ensures that corporate profits are taxed more heavily in Britain than in most advanced economies, once allowances and deductions are included.
- Arguably most larger international employers don’t pay corporation tax so it really impacts the middle rump of businesses.
- However, one key point that many missed was the status quo maintained with Capital Gains Tax. Entrepreneurs’ Relief remains unaffected and this signals that the decision to support founders in the innovation sectors remains.
- Founders often make decisions based on their personal taxation as much as they do the business. The UK remains open for business.
- Frozen Income Tax
- In general, this is good news but whilst the tax rates have been frozen so have the personal allowances and 1m more people will move into the higher rate of tax.
- Why is this important? With inflationary rises it means that in 5 years households could be between £500 and £2,500 worse off per year.
- Self Employment Scheme
- Extended for around 600,000 self-employed who filed their Self Assessment for 19/20. Only good news but maybe too little too late.
- The final punch to Limited Company directors landed with no incremental support over and above the almost impossible inability.
- An anomaly on the taxation system has punished so many and the social safety net for company directors.
- An emergency boost of £408m to museums, galleries and theatres.
- This is coupled with another £300m to the Culture Recovery Fund set up last year.
- Finally, specific groups of museums to be given £90m
- The wider ecosystem of our community is intrinsically linked to this sector so survival is not only important for culture but for our clients also.
- Levelling Up & the City of London
- The mantra of the Conservatives since the last general election was a levelling up of the UK economy.
- Most would argue that this is a sensible approach but it hasn’t gone unnoticed that the levelling up is centred around the new Conservatives constituencies north of the Red Wall. The Treasury moving next door to the Chancellor’s own constituency may also be a coincidence but the 40 out of the first 45 towns to benefit are in Conservative seats.
- With the majority of Moose clients in the shadow of the City of London, we have a vested interest that things recover. The overhaul of the Regulatory system announced indicates that the lack of a trade deal for the City may have been more intentional than first thought.
- The stamp duty holiday has been extended for six months to prop up the housing market over the summer and to remove the backlog of deals that are due to close this month.
In addition, 5% deposits are back in play with five major lenders backing the scheme, helpful for those trying to take the first step on the property ladder.
If you have any questions about the Budget and it’s impact on you or your business, get in touch on 0203 026 4679 or at firstname.lastname@example.org.
This article is a general summary only. It should not replace accounting advice tailored to your specific circumstances.
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