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Posted on: 04/03/2021

A year ago, in his first budget, the Chancellor announced the UK Government’s initial response to the COVID-19 pandemic and since then we have seen a year of extraordinary economic challenge. As the economy reopens, this year’s Budget sets out the steps the Government is taking to support the recovery and to ensure the economy can build back better, with radical new incentives for business investment and help for businesses to attract the capital, ideas, and talent to grow.

Economic and fiscal context:

• COVID-19 has had a profound effect on the UK economy. As the pandemic hit, the UK entered its first recession in 11 years
• As a result of the pandemic, borrowing reached 16.9% of GDP in 2020-21, the highest level of peacetime borrowing on record, and underlying debt will peak at 97.1% in 2023-24
• The UK economy shrank by 10% in 2020
• The economy is forecast to rebound in 2021, with predicted annual growth of 4% this year. A return to pre-COVID levels is expected by the middle of 2022, with growth of 7.3% next year

Protecting the jobs and livelihoods of the British people:

• The furlough scheme will be extended until the end of September 2021. The Government will continue paying 80% of employees' wages for hours they cannot work. Employers will be asked to contribute 10% in July and 20% in August and September
• Support for the self-employed will continue with a fourth grant covering February to April 2021, and a fifth grant from May 2021. With the tax return deadline passed, 600,000 more people, many of whom became self-employed last year, can now claim the fourth and fifth grants
• The apprentice incentive payment the Government give businesses is doubling to £3,000 –for all new hires, of any age

Backing Businesses:

• From April, Restart Grants will be available to help businesses reopen and get going again. Non-essential retail businesses will open first, so they will receive grants of up to £6,000. Hospitality and leisure businesses will open later in the year, or be under more restrictions, so they will receive grants of up to £18,000
• An additional £425m of discretionary business grant funding is now available
• £300m additional funding for the Culture Recovery Fund to support the arts, culture and sporting institutions as they reopen, this fund is open now
• From April, a new Recovery Loan Scheme will provide businesses of any size loans from £25,000 up to £10m, through to the end of this year
• The 100% business rates holiday will continue until the end of June 2021. For the remaining nine months of the year, the Government are cutting business rates by two thirds
• The 5% reduced rate of VAT for hard hit sectors has been extended for six months, then an interim rate of 12.5% will begin on 1st October 2021 until returning to normal in April 2022
• In 2023 the rate of corporation tax, paid on company profits, will increase to 25%. To protect small businesses a Small Profits Rate maintained at 19% will be in place for businesses with profits of £50,000 or less. A taper will ensure that businesses only start paying the full rate on profits from £250,000. In total only 10% of companies will pay the full rate
• For the next two years, when businesses invest in new equipment, they can offset all of the costs against tax, plus an additional 30%. The Government are calling this The Super Deduction

Innovation, Environment and Infrastructure:

• A new UK Infrastructure Bank will be set up in Leeds. This new bank will have £12bn in capital, with the aim of funding £40bn worth of public and private projects
• The Future Fund Breakthrough will fill the scale-up funding gap for innovative technology businesses with high R&D-intensity. It is estimated that 1% growth in these firms could boost the UK economy by £38bn
• £15bn will be available in green bonds, including for retail investors, to help finance the transition to net zero by 2050
• New visa reforms aimed at highly skilled migrants, including a new unsponsored points-based visa to attract the best and most promising international talent in science, research and tech and a new improved visa process for scale-ups and entrepreneurs
• Two new Help to Grow programmes will commence by the autumn. Help to Grow: Management will help thousands of SMEs get world-class management training. Help to Grow: Digital will help SMEs develop digital skills with free expert training and a 50% discount on new productivity-enhancing software
• £1bn fund to promote regeneration in a further 45 English towns, including Middlesbrough, Preston, Swindon, Bournemouth, Newark, West Bromwich and Ipswich
• The first eight sites were announced for freeports in England: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside. Freeports are secure customs zones located at ports where business can be carried out inside a country’s land border, but where different customs rules apply

General:

• Minimum wage to increase to £8.91 an hour from April 2021
• The Government are not raising the rates of income tax, national insurance, or VAT. Next year, the threshold will increase to £12,570 but it will then be frozen until April 2026
• Contactless payment limit will rise to £100 later this year
• Fuel duty to be frozen for the eleventh consecutive year