United Kingdom

Budget 2021 summary: key changes and highlights at a glance

Barely a year after his baptism of fire as Chancellor - taking the job just a month before coronavirus upended Britain’s economy - Rishi Sunak is addressing the nation again.

Much like this time 12 months ago, Mr Sunak is expected to commit huge chunks of public cash to keeping people in their jobs and the wolf from the nation’s door during the pandemic.

But unlike that March 2020 Budget, which marked the very start of the Government’s response to the financial mayhem wrought by locking down huge swathes of the economy, the Chancellor is also set to start clawing some money back into Whitehall’s much-depleted coffers.

Here’s everything the Chancellor has already announced, or is expected to announce, in the Spring Budget 2021.

Key Budget 2021 announcements at a glance:

Follow our live business blog for the latest reaction and analysis to the Spring Budget 2021.

Furlough extension

Mr Sunak has announced a major extension to the Coronavirus Job Retention Scheme. Originally due to expire at the end of April, it will now run until the end of September.

The scheme has so far cost the UK over £54bn but it has saved the unemployment rate from rocketing during the pandemic - rising only to 5.1pc as the Government stepped in to pay a total 11.2m workers’ wages since March last year.

Furloughed employees will continue to have 80pc of their salaries paid, with the Government stumping up the entire sum until the summer. From July employers must contribute 10pc of staff’s wages, and 20pc from August.

“Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK,” Mr Sunak said.

“There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead - and beyond.”

Self-Employment Income Support Scheme (SEISS) extension

Mr Sunak will also extend SEISS support to offer more handouts to self-employed workers who find themselves struggling. 

A fourth SEISS grant will be available to claim from April, worth 80pc of three months’ average trading profits, up to £7,500.

The Chancellor is also due to detail a fifth grant during his Budget speech, though that is expected to be less generous than the ones so far.

The Treasury has closed a loophole that prevented 600,000 people who became self-employed in the 2019-20 tax year to receive the grants.

However, there are reports Mr Sunak may target self-employed workers with a hike in National Insurance later down the line.

Tax hikes: Corporation tax

Businesses are set to bear the brunt of Mr Sunak’s attempts to stem the bleeding from the Treasury, and the hikes are expected to start with corporation tax.

The UK’s corporation tax has fallen from 28pc a decade ago to 19pc. But the Spring Budget 2021 will most likely see that rise to between 23pc and 25pc. 

That is still very low among G7 countries.

Tax hikes: Capital gains tax

Mr Sunak is set to bring capital gains tax (CGT) in line with rates used for income tax.

Doing so would lead to a massive increase in costs for people selling on business assets, second homes and non-ISA shares. Most taxable assets face a CGT charge of 10pc or 20pc. But under the expected hike, people would face either 20pc, 40pc, or 45pc duties depending on the value of the assets.

The annual tax-free allowance of capital gains - currently set at £12,300 - could be slashed back to between £2,000 and £3,000 in a further blow to the wealthy.

The likelihood of the move has already prompted landlords to sell up to avoid being stung.

Income tax

Income tax will not increase in order not to break a key Tory election manifesto pledge.

However, Mr Sunak is expected to raise rates by the backdoor: the £12,500 threshold above which workers pay income tax will be frozen, as well as the £50,000 threshold beyond which the 40pc income tax rate applies.

That would raise £6bn by the time the next election rolls around, according to The Telegraph’s own analysis.

Tax freezes: Fuel duty

Despite the Government’s ambition to go electric on UK roads by banning new petrol and diesel cars from 2030, Mr Sunak may wait to end the 10-year freeze on fuel duty.

With people avoiding public transport to curb the spread of coronavirus, they have relied on cars more during the pandemic.

While the Treasury reportedly considered a rise of up to 5p a litre from March, reports now suggest the Chancellor will take no action in the approaching Budget.

Tax freezes: Beer duty

Number 11 will also look at reducing alcohol duty for pubs in a bid to help them avoid being undercut by supermarkets, which have thrived during the pandemic while pubs have suffered repeated lengthy closures.

Conservative MP for Clacton Giles Watling asked at PMQs the week before the Budget: “Now we're out of the EU, surely we can do as we please with beer duty? Differentiation in favour of on-sales could deliver great benefits to pubs.”

Prime Minister Boris Johnson responded: “There is just such a review being carried out after consulting pub owners and brewers and others, and I know that the Chancellor is looking very closely at the findings.”

Hospitality handout

High streets will receive a £5bn helping hand to get back on their feet after 12 months of repeated lockdown closures. 

Pubs, hairdressers, restaurants and other shops deemed non-essential (and therefore victims of lengthy periods spent shuttered) can apply to receive up to £18,000 - a move expected to benefit around 700,000 businesses.

Extended VAT relief

With venues unable to even partly reopen until 12 April at the earliest, MPs and hospitality bosses have urged the Government to extend VAT and business rates relief for the sector.

Whitehall waived business rates for companies in the retail, hospitality and leisure sectors at a cost of around £10bn for the 2020-21 financial year. It also slashed VAT from 20pc to 5pc for pubs and restaurants in July, running to the end of March.

However, ministers are facing calls to extend these support measures to the end of 2021, with Boris Johnson’s gradual reopening roadmap meaning businesses will be operating under social distancing restrictions until at least late June.

Summer sport and arts package

A £300m package will target summer sports after a year with no spectators. Cricket is due to be a big beneficiary.

Meanwhile £400m will be made available to galleries, live music venues, museums and theatres as the arts struggle to cope with social distancing restrictions.

Investment

The Chancellor will allocate around £22bn for a previously announced new infrastructure bank, comprising £12bn in a capital investment and a further £10bn in loan guarantees.

A green savings bond, the first of its kind, will also be announced to encourage climate-friendly investments in offshore wind and other renewable energy sources.

Eat Out to Help Out 2

The sequel is rarely better than the original, but the hospitality industry will be hoping another outing for Mr Sunak’s restaurant voucher scheme again lures millions of diners back to their tables this summer.

The original scheme ran during August and offered up to £10 off per person at participating restaurants. While it is credited with people ordering 100m meals, it still cost the taxpayer £849m. But now the Daily Mail reports Mr Sunak may bring the scheme back for a second outing to boost flagging restaurants this summer.

Treasury economists are reportedly also weighing up whether to hand out high street vouchers to try and revive bricks and mortar retailers.

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