Earlier this week, the Chancellor of the Exchequer, Rishi Sunak, delivered the 2021 Spring Budget. It was one of the most carefully watched Budgets in recent memory, given the significant economic impact of coronavirus over the last 12 months. With the government borrowing a record amount this financial year (£271 billion to be exact), Sunak outlined his plans for paying off this huge debt and for supporting people and businesses who have lost large amounts of income because of the pandemic. Here we round up some of the main talking points and what they mean for your personal and business finances.
Support Schemes Extended
Originally due to end on 30th April, the furlough scheme was extended until September. This means the government will continue to pay those furloughed during this time frame 80% of their salary, capped at £2,500 per month. However, from July, employers will be required to contribute 10% towards the hours their staff are not working. This will increase to 20% in August and September.
The Chancellor also announced further support for self-employed workers, with an extension to the Self-employment Income Support Scheme (SEISS). People who work for themselves will receive a fourth grant from April, and a final grant In May, to cover their loss of earnings as a result of the covid-19 pandemic. What’s more, updates to the scheme mean that 600,000 people who were not eligible for the payment before now qualify for the grants.
Personal Tax Thresholds
One of the biggest headlines to come out of the 2021 Spring Budget was the announcement about the personal income tax threshold. From this April, the tax personal allowance will rise by £70 to £12,570, before being frozen until 2026. This means that as people receive pay rises, they will cross into the higher tax bracket and be forced to pay more in income tax (around 40%). 1.3 million people are expected to start paying income tax and a million more will become higher-rate taxpayers as a result of the initiative.
Corporation Tax and VAT
As one way of paying for the government’s coronavirus response, the corporation tax paid by limited companies will rise from 19% to 25%. This is not the case for smaller businesses (those with profits of £50,000 or less), who will continue paying the base rate. The increase will take effect until April 2023, giving businesses a two-year tax break designed to encourage them to spend, expand and recover.
Last year, Sunak made pubs, restaurants and other non-essential retail businesses exempt from paying business tax rates, a move that was set to finish in March 2021. However, with these premises experiencing a severe lack of footfall due to lockdown, this ‘tax holiday’ has been extended for a further three months until the end of June. Furthermore, because they have suffered particularly badly, hospitality venues will begin paying tax again in July, but at a third of the normal rate.
Get Help with your Personal and Business Finances
With its multitude of announcements, it can be difficult to know exactly what parts of the 2021 Spring Budget does and does not apply to you and your business. At Hysons, Chartered Accountants, we specialise in both personal and business finance management. This means that whatever question you have about how you may be impacted by the Budget, we have the answers and solutions for maintaining your financial stability. Get in touch today with our team of skilled accounting advisors with your questions about the Budget.