A BUDGET TO CELEBRATE?

The Chancellor has outlined his Budget plans as we all try to come out of lockdown and live more effectively with the Covid19 pandemic – both personally and professionally.

The importance of this Budget cannot be underestimated. To look at the context, to date the pandemic has caused the loss of around 700,000 jobs, a shrinking of the economy by ten per cent. The Office of Budget Responsibility predicts that unemployment will peak at 6.5 per cent and will then fall with stronger recovery next year. Borrowing is at its highest rate since World War Two.

The Government said the Budget was fair and set out a clear plan for a long, slow recovery which would allow a slow paying back of the borrowing which had been necessary to safeguard the economy.

The Opposition said it was a Budget which ‘papered over the cracks’ and which was ‘unfair and economically illiterate’. They claimed the Government had missed an opportunity to create a fairer society. 

There were several things not mentioned in the Budget including key workers, council tax, social care, social security (though the £20 uplift in Universal Credit has been extended for a period of time). 

Also a few other things were announced including the creation of a Covid fraud task force within HMRC to chase down those who have fleeced the system and a further £19 million for domestic violence programmes as cases have risen sharply during lockdown. 

There was also a new visa scheme to allow start-ups and tech firms to source talent from overseas and the announcement of a new ‘green’ savings product, The Green Bond, which will be launched later in the year. One other change is the lifting of the £45 allowed on contactless spending to £100. 

Here are just a few of the business highlights: 

Business:

• Extension of the furlough scheme and the self-employed support scheme until the end of September.
• Corporation tax will rise from April 2023 from 19 per cent to 25 per cent for all businesses with profits of £250,000 or more. There will then be a sliding scale of tax down to 19 per cent for companies making profits of £50,000 or less. 
• The VAT threshold of £85,000 will be frozen until 2024. 
• New Recovery Loan will be offered to replace Bounce Back Loans and CBILs, available until the end of 2021 and businesses can apply for £25,000 up to £10m.  The government will back that loan up to 80 per cent. 
• There will be an extension to the business rates holiday for hospitality, retail and leisure businesses until the end of June and then it will be discounted by two-thirds util the end of the year. 
• For hospitality and tourism businesses, the 50 per cent reduction in VAT will be extended (five per cent) until September 30 and then it will be charged at 12.5 per cent for a further six months. 
• Newly self-employed previously excluded from support will now be eligible to grant support for their businesses. This take in a further 600,000 self employed previously excluded.
• National Minimum Wage will rise in April to £8.91 an hour.
• Businesses will get £3,000 for every apprentice they take on.
• Restart grant available in April for businesses which will be opening of up to £6,000 per premises for non-essential retail and for other businesses opening later such as gyms, up to £18,000.
• Allow companies to carry back losses up to three years.
• Create a ‘Super-Deduction’ (capital allowance) of 130% for investment in business equipment. 
• £700m for arts, culture and sporting institutions. 

Personal: 

• Personal tax allowance on earnings will rise in the next financial year to £12,570 and will then be frozen until 2026. For higher rate tax payers the threshold will rise to £50,270 and then frozen until April 2026. 
• Income tax and National Insurance contributions frozen until end of March 2026. 
• In property, the Stamp Duty holiday will be extended for purchases up to £500,000 until June 30 and then it will be only applied on purchases of over £250,000 until the end of September, reverting to the £125,000 threshold from October 1. 
• There will now be a new mortgage guarantee scheme, which will allow first time buyers to get a 95 per cent mortgage from most major banks so far with the aim of ‘turning Generation Rent into Generation Buy’. 
• Inheritance tax will be frozen until April 2026 and duty on wine, beer, cider and fuel will all be frozen and planned rises scrapped for the moment. 

How are our local business owners reacting to The Budget 2021?

Martin Gurney, tax partner at Haines Watts Swindon said: “In my opinion, this is an entirely reasonable and well-reasoned approach – we should not tax the economy without first trying to stimulate a return to higher economic activity, and the Chancellor gives himself the opportunity to amend these future provisions, should circumstances change, without being seen to have worsened the position with tax increases.

“I still believe there will be other tax changes announced in due course as the economy stabilises – but in the interim this appears to be a sensible plan to both support the economy and improve the chances that economic conditions will move favourably.”

Chris Blackwell, co-director of Swindon-based TED Mortgages said:

“Overall I’m very excited for the prospects in the mortgage and housing industries as well as the general outlook for business. Feels like the government are looking at innovative and progressive ways to build the economy to recover instead of cutting funding of public services.

“Although no increase in taxes and NI for those in work will be warmly received the increases to corporation tax will impact normal working people who their own limited companies, even though it will be on a sliding scale up to 25 per cent. I think the budget is extremely fair however a small increase of say 0.5% on PAYE to share some of the load would have been fairer.”

For Chris and his team the Stamp Duty threshold of £500K and then £250k should create more activity in the housing market alongside five per cent deposit mortgages for first time buyers.

“This will give the banks confidence to lend again with small deposits and will create a new flow of activity in the market again for those who are struggling to save larger deposits. The housing market is going to be flying!” 

Diana Campbell, Managing Director of global jobs search site Zoek said:

“I cannot help question why there’s a need to increase Universal Credit until September, as last week alone there were over 250,000 jobs on Zoek – showing that there are jobs available. 

“People are to be encouraged to get back into work, as the economy and businesses boom when there is less unemployment. 

“With furlough, it needs to be understood it’s there to help support businesses to get back on their feet and reopen, as trade might not be at the same level as pre-COVID for some, therefore some of their employees may need to stay on furlough for longer. 

“I’m a big fan of the ‘Help to Grow’ scheme helping SMEs with their management and digital skills. It can help small businesses innovate and become more competitive, allow them to grow – which again, could mean more jobs being created. This support could also inspire more start-ups!”

Fiona Scott of Scott Media is the South West ambassador for Forgotten Ltd, a campaign group for business owners (often sole traders) who operate through a limited company and are paid in dividends. 

“Once again directors of limited companies have been left out in the cold in this Budget in spite of lobbying by many MPs, support from the Treasury Select Committee and by most of the Metro Mayors across the UK. 

“While some of us who have premises have got a small grant to pay some business bills, or have been able to furlough staff – we have not been able to pay our own personal bills. Furloughing ourselves means we cannot work on our businesses at all which would spell disaster anyway. 

“We can see no light at the end of the tunnel. Particularly badly hit have been events companies, hair stylists, beauticians, travel agencies and many more. We’re devastated and we are the local independent business owners in every town and city up and down the land.”

Liz Hutchings, founder of the Total Guide to franchise said: 

"The extension of furlough will give businesses some more breathing space however my hope is that many businesses won’t need to use the scheme right up to the end date. I hope with the new support to those hardest hit ie leisure, tourism, hospitality, culture and arts,  businesses and consumers will be able to start to support each other so we can stop relying on the government handouts and get back to business.

I’m really interested in the Help to Grow Digital training scheme and will be taking up the opportunity. It’s time to move on and this support will have the added benefit of getting us out of this hibernation mindset and gear us up for focussing on growth again."

To see the Budget documents in full visit https://www.gov.uk/government/publications/budget-2021-documents

*Pictures - Martin Gurney, Chris Blackwell & Diana Campbell.