After an extraordinary 2020, many of us waited with eager anticipation to hear the Chancellor’s Budget 2021 announcement. As with many other countries, the UK economy has been hit hard by this unprecedented pandemic. According to the Office of National Statistics, GDP fell by 9.9% in 2020 the largest fall in 300 years.
The UK’s response to the pandemic has been met with criticism, with Boris Johnson being accused of delaying lockdowns, contributing to higher infection rates. Yet the UK has clearly provided substantial support to businesses, public services and individuals with UK government support amounting to £407 billion this year and next. Such Government spending has not been seen since World War 2 and much of this support has been made available via government borrowing.
The Budget has offered many individuals security with the announcement that the UKs Job Retention Scheme (furlough) will be extended to September 2021, paying up to 80% of employees’ wages. The only difference is that employers will now be expected to contribute towards these payments as the restrictions are eased over the coming months, 10% towards the hours their staff do not work in July, increasing to 20% in August and September. In addition, the UK government will extend the Self-Employment Income Support Scheme (SEISS) to September 2021, offering grants up to £7,500 to support those who need it the most. Rishi Sunak also announced that the £20 weekly increase to Universal Credit payments will be extended for a further 6 months to support low-income families and the unemployed.
Sunak’s Stamp Duty Holiday extension was well received with the £500,000 nil rate band remaining in place until 30 June, offering buyers an extra 3 months to complete on home purchases. This was complemented by the announcement that the government will offer incentives to lenders to encourage 95% guaranteed mortgages, where buyers only have to put up 5% deposit. Lenders such as Lloyds, NatWest, Santander, Barclays, HSBC and Virgin Money have already signed up for the scheme.
There was another sigh of relief as the Chancellor announced there would be no changes to rates of income tax, national insurance or VAT, which is likely to encourage consumer spending. The personal income tax allowance will remain frozen at £12,570 from 2022 to 2026 as will the higher rate income tax allowance, at £50,270 from 2022 to 2026.
As of April 2023, corporation tax will increase from 19% to 25%, but is only applicable on profits over £250,000.. It is difficult to anticipate the impact this will have on businesses whilst the economy is still in such a period of flux.
The Chancellor’s front loaded 2021 budget appears measured and pragmatic, offering individuals confidence and security. Yet the effectiveness is heavily dependent upon individual spending as the lockdown is lifted and on how the economy responds.
-  Stamp duty holiday extension: How long the scheme was extended in Budget 2021, and when it ends (inews.co.uk)