United Kingdom

Spring Budget 2021: What time is the announcement, and what to expect from Rishi Sunak's statement?

Income tax

Mr Sunak is not expected to change the rates of income tax, given the Tory 2019 manifesto pledge not to raise the rates of income tax, VAT or national insurance.

However, as The Telegraph revealed, he is expected to freeze the £12,500 threshold, above which you start paying tax, and the £50,000 threshold, above which you pay 40 per cent tax.

If the freeze kicks in from April the move would raise up to £6 billion by the next election due in 2024 as millions more people pay a higher rate of tax on a chunk of their income.

The move is widely dubbed a “stealth” tax because the rates of tax are not strictly increasing but billions more pounds are flowing into the Treasury.

Capital gains tax

A lot of focus has fallen on capital gains tax and whether Mr Sunak is considering increasing it as he looks to fill the estimated £40 billion fiscal black hole caused by the pandemic.

One idea being speculated is that the thresholds for capital gains tax could be increased to something closer to those used for income tax.

It is not known where Mr Sunak has ended up on the point but, with fierce warnings from some Tories over rises, he is expected to push back a decision to his Autumn Statement.

Fuel duty

The Chancellor will announce that fuel duty will not be rising, meaning a 5p per litre increase, which had been due, will not be taking place.

It is the tenth year in a row the duty has been frozen and is a reflection in part of vocal campaigning from Tory backbenchers and The Sun.

Boris Johnson told that particular paper on Tuesday: “I firmly believe that the economic recovery is going to be powered by white van man, amongst others.”

Furlough

The Chancellor is expected to extend the furlough scheme until at least June, the month which according to the Government's new reopening “roadmap” all lockdown restrictions will be lifted.

The scheme sees the Government cover 80 per cent of wages for workers who have been put on leave by their companies, up to a maximum of £2,500 a month.

At its height last year the scheme was supporting 11 million people a month but that has dropped to about five million people a month now.

The extension of furlough is a major investment by the Treasury – it costs around £5 billion a month now – and reflects Mr Sunak’s declared focus on “jobs, jobs, jobs”.

Universal Credit

The £20-a-month uplift in Universal Credit, a major benefits payment, will be extended by six months, helping poorer families through the financial impacts of Covid-19. 

The uplift was due to stop at the end of March but the Chancellor will announce on Wednesday that it will now continue to around the end of September.

The Labour Party has been calling for the change for weeks, arguing that it was the Government’s responsibility to look after the poorest in society during the pandemic.

High street

A fund of £5 billion will be announced to help pubs, restaurants and shops reopen after a deeply challenging past year with multiple lockdowns. They will be able to get up to £18,000 each. Some 700,000 businesses are expected to be eligible for the money once the fund goes live.

Other high street firms, such as hairdressers, beauticians and personal care services, will also be able to benefit from the money.

Self-employment grants

Sizable grants for the self-employed will continue, The Telegraph revealed last month, with the fourth round of grants keeping the same terms as beforehand.

That means that the grant for February, March and April is expected to see the Government cover 80 per cent of monthly profits up to a maximum of £2,500 a month.

Some help is also expected from May onwards, given the Government's reopening roadmap now keeps some lockdown restrictions in place until mid-June.

The Treasury is under pressure to tweak the system to fix a number of flaws, including covering people who became self-employed in mid-2019 but currently are not getting help.

First-time buyers

The ‘Help To Buy’ scheme is back, with the Government intervening to allow house-hunters to get on the property ladder with a deposit of just five per cent of the sale price.

The Treasury will guarantee a chunk of the loan offered by mortgage companies to make it easier for young couples to get approval for mortgages.

The help is for properties worth up to £600,000.

Mr Sunak is also expected to extend the current freeze on stamp duty by around three months so that deals on the brink of completion do not collapse.

The Chancellor will stand up to deliver the next Budget on Wednesday, March 3, with a mind-boggling array of problems before him.

After 10 years campaigning for financial discipline in the wake of the financial crisis, the Conservatives have suddenly found themselves presiding over the biggest borrowing binge since the Second World War.

So far, Rishi Sunak’s rhetoric has remained cautious, indicating that the long battle against the deficit of the credit crunch has left its mark on the occupant of 11 Downing Street.

In his spending review in November – before the latest wave of Covid-19 really took off – the Chancellor warned this year’s bumper borrowing was only possible “because we came into this crisis with strong public finances”.

“We have a responsibility, once the economy recovers, to return to a sustainable fiscal position,” he said.

Back in October, he called balancing the books a “sacred duty”.

Potential tax hikes have been mooted on fuel duty, corporation tax and even extra charges on the self-employed.

Mr Sunak has made clear the Budget will focus on “the next stage” of the response to Covid-19, which has worsened since November, though the vaccines offer hope of reopening in the foreseeable future.

So will he open the spending taps even further, or tighten the purse strings?

Corporation tax

The Chancellor is expected to announce plans to raise the rate of corporation tax from 19 per cent, though the timings and end target for such a move remain unclear.

There has been widespread speculation the rate could rise to 23 per cent or even as high as 25 per cent, which would likely still be the lowest rate in the G7.

Treasury sources have been quoted pointing to the fact Joe Biden’s treasury secretary has indicated she wants America’s corporation tax to rise from 21 to 28 per cent.

The increase could start later in the year or early next year if the Chancellor pushes to delay changes with the economy still in a freeze from the Covid-19 lockdown.

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