Budget 2021: Furlough, VAT Cut & Business Rates Relief Extended + Additional Support

Rishi Sunak Budget 2021

In the Budget, the Chancellor has set out a £65 billion three-point plan to safe-guard jobs and protect businesses as the country moves forward with it’s “one-way system” out of restrictions over the coming months:

  1. Billions to support businesses and families through the pandemic
  2. Investment-led recovery as UK emerges from lockdown
  3. Future changes to strengthen public finances

Chancellor of the Exchequer Rishi Sunak has set out his priorities to support those hardest hit, with extensions to furlough, self-employed support, business grants, loans and VAT cuts.

 

Furlough Extended To September 2021

The furlough scheme has protected more than 11 million jobs since it first launched in March 2020, with the scheme set to end in April.
 
The new extension to the scheme means that businesses will be able to furlough staff until September, although businesses will have to contribute to hours their staff don’t work from June and increasing further in August:
 
  • July: 10% contribution
  • August – September: 20% contribution

 

5% VAT Cut Extended

To continue supporting the 150,000 businesses in the tourism and hospitality sectors and to protect 2.4 million jobs, the government has extended the temporary 5% reduced rate of VAT until 30 September 2021. To help businesses manage the transition back to the standard rate, a 12.5% rate will then apply for a further six months, until 31 March 2022.

 

Business Rates Relief in England

The business rates holiday in England has been extended by an additional three months. That means 750,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1 April when combined with Small Business Rates Relief, with further relief available for the rest of the year.

 

Corporation Tax Set To Increase – But Not Until 2023

To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19%. A tapered rate will also be introduced for profits above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
 
 
 
Support For All Nations

Many of the announcements in the budget apply to all nations, such as the extension of job support schemes and VAT cuts, with an additional £2.4 billion going to the devolved administrations in 2021-22 through the Barnett formula:

  • Scottish Government will benefit from a £1.2 billion funding boost
  • Welsh Government a will benefit from a £740 million funding boost
  • The Northern Ireland Executive will benefit from a £410 million funding boost

 

Additional Information

For more information about the budget, visit the official government website at https://www.gov.uk/government/news/budget-2021-sets-path-for-recovery

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