Chancellor announces tax and spending plans in Budget

As the country continues to deal with the COVID crisis, Chancellor Rishi Sunak announced in his Budget today a broad range of measures to support businesses and households alongside details of how the ongoing support shall be financed. The business support headlines include:

• The extension of the Furlough scheme until the end of September at the 80% rate, although employers are required to cover 10% in July and 20% in August and September;
• The 4th tranche of Self Employed Income Support Scheme (SEISS) will be at 80% of the 3-month average profits and can be claimed from late April;
• A 5th tranche of SEISS is available for May to September but at a reduced rate depending on the reduction in profits of the business;
• Business rates holidays for retail, hospitality and leisure will continue to the end of June and at a discount of up to 67% for the remainder of the year;
• Recovery loan scheme providing loans from £25,000 to £10,000,000 that will be 80% guaranteed by the Government;
• A super deduction allowance for businesses investing in new plant and machinery from 1st April 2021 to 31st March 2023, giving a deduction of 130% against profits in the year of acquisition or 50% on special rate assets.

In addition to these broad business support measures, the Chancellor outlined details of his sector-specific support:

• The reduced VAT rate of 5% for the hospitality sector will continue until 30th September 2021. It will then increase to 12.5% until 31st March 2022 before returning to the full rate of 20% on 1st April 2022;
• The construction sector is being supported by the Stamp Duty Land Tax nil rate band extension for residential properties. The temporary £500,000 nil rate has been extended to 30th June 2021. It will then be reduced to £250,000 until 30th September 2021 and then return to the standard band of £125,000.

The Chancellor also announced he would extend the Universal Credit increase of £20 for six months to support households on lower incomes. The Chancellor has set out a plan to raises taxes to protect the Exchequer from these additional costs, including:

• Increasing the rate of Corporation Tax to 25% from 1st April 2023 for companies with profits over £250,000, whilst for companies with profits up to £50,000 the Corporation Tax rate will continue at 19%. There will be a tapered rate between these two profit levels;
• The freezing of personal allowances and income tax rate bands for 6th April 2022 to 5th April 2026;
• The thresholds and bands for Pensions, VAT, Capital Gains Tax and Inheritance Tax will remain unchanged.

As expected, this was a generous Budget to support businesses and households, although a large burden will fall on successful businesses, who face a big tax increase from 2023 to finance the announced measures. We will provide further guidance on these announcements as and when more details are made available. If you would like to understand how this affects you, please speak to your local partner on 0330 088 7111.