Spring Budget: What we know so far

Rishi Sunak

Rishi Sunak

Rishi Sunak has just kicked off his Spring Budget in the House of Commons.

He began by stating that more than £280bn has been spent on helping businesses and wider economy through the pandemic – and that the UK has had the highest level of borrowing outside war time, and that there was a long road ahead. However, the unemployment rate is expected to peak at 6.5% next year – much lower than the previous prediction of 11.9% this year.

Business across the UK will continue to receive the support from the government through the Furlough scheme until the end of Setpember. The chancellor said there will be no change of terms. After July, businesses will be asked for a 10% contribution, rising to 20% in August and September. He also revealed that support for the self-employed will also continue until September.

Further announcements regarding VAT revealed that it will not return to a normal rate until next April.

As the economy reopens in the summer, the government will help people whose turnover has fallen by 30% or more through a £33bn support scheme.

Retailers and hospitality firms will be able to get a grant from a £5bn fund to help them reopen after lockdown – with grants up to £18,000 per firm are available. Sunak announced that non-essential retail businesses will receive grants of up to £6,000 per premises through its new ‘Restart Grants’.

An extra £300m will be added to the government’s £1.57bn Culture Recovery Fund.

Sunak promised sports organisations will get £700m to help them reopen. He reaffirmed that the government will  back the joint UK and Ireland bid to host the 2030 World Cup. Sports and culture firms will also receive a £300m recovery package – including £25m new funding to support grassroots football

The Covid-19 vaccinations rollout plan will receive an extra £1.65bn to enable all adults to receive their first dose by 31 July.

During his initial speech, Sunak revealed that more than 700,000 people have lost their jobs during the pandemic and the economy has shrunk by more than 10%. He then set out the planned economic recovery – and said that the economy will return to pre-Covid levels by mid-2022.

He said: “The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.”

Sunak stated that the National Living Wage will rise to £8.91 from April 1st.

To protect hospitality, retail and tourism jobs, the 5% reduced rate of VAT will be extended for six months to 30th September – saving more than £5bn according to Sunak.

The new £500,000 nil rate band for Stamp Duty won’t end on 31st March, it will end on the 30th June. Then, to smooth the transition back to normal, the nil rate band will be £250,000, double its standard level, until the end of September.

The government is set to continue with the 100% business rates holiday through to the end of June. For the remaining nine months of the year, business rates will still be discounted by two thirds, up to a value of £2m for closed businesses.

According to Sunak – this will save businesses more than £6bn.

In a bid to change ‘Generation Rent into Generation Buy’, Sunak announced that a new policy to stand behind homebuyers through a mortgage guarantee. Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages.

Sunak announced that the total cost of the government’s COVID-19 support package through the end of the year will top £352bn.

He then stated: “We’re not going to raise the rates of income tax, national insurance, or VAT. Instead, we are freezing personal tax thresholds. Nobody’s take home pay will be less than it is now, as a result of this.”

The government has borrowed more than £355bn this year – and next year it is expected to be £234bn.

He also announced a new £100m scheme to tackle fraud in the government’s COVID schemes – creating a new Taxpayer Protection Taskforce. This will create around 1,000 new roles as investigators.

Regarding the future of the hotly debated corporation tax – Sunak stated that in 2023 the rate of corporation tax, paid on company profits, will increase to 25%. He did insist that this is still the lowest corporation tax rate in the G7. This will only affect the UK’s largest companies. He also introduced the Small Profits Rate to ensure only businesses with profits of over £250,000 will be taxed this rate.

Sunak also introduced ‘The Super Deduction’ – meaning that for the next two years, the government is allowing businesses to claim 130% of their new machinery cost as a tax cut – giving a boost to the construction and engineering sectors.

Planned increases on alcohol duties have been cancelled – saving customers more than £7bn.

Sunak then introduced a new ‘Help to Grow’ scheme. Through this, the programme will help small and medium sized (SMEs) businesses across the UK learn new skills, reach new customers and boost profits. Firms can get an Executive Development programme that could help them improve business performance and growth potential through the scheme. There will be a free online advice and money off software that could help them save time and cut costs.

New visa reforms have been introduced, which are aimed at recruiting highly skilled migrants. This will be achieved through a new unsponsored points-based visa to attract the best and most promising international talent in science, research and tech – in order to support scale-ups and entrepreneurs across the UK.

In further support for entrepreneurs – Suank is launching a new Future Fund Breakthrough to help fill the scale-up funding gap. More than £20m grant funding is now available to apply for. According to government data – a 1% growth in the value of scale-up firms could increase the value of the UK economy by more than £36bn.

In a move to bring investment, trade and job creation, Suank announced the first eight Freeport locations in England.

These will be in Thames, Liverpool, Solent, East Midlands, Felixstowe, Plymouth, Humber and Teeside.

He said: “New Freeports will encourage free trade and reinforce our position as an outward-looking, trading nation, open to the world.”