Budget expands support for battered Covid economy – Forbes Advisor UK
Rishi Sunak’s second budget was perhaps the most ‘leaked’ of all time, with most of the key announcements dragged across the media in the days leading up to the speech.
But while there was no major surprise, the occasion provided the Chancellor with the opportunity to reaffirm the scale of government support given to individuals and businesses during the coronavirus crisis.
Pledging to do whatever it takes to protect the economy, he noted that 700,000 people have been left unemployed due to the pandemic, and the economy has contracted by 10% over the years. Last 12 months. Government borrowing is at its highest outside times of war, reaching £ 355 billion this year alone.
However, Mr Sunak noted that the Office of Fiscal Responsibility predicted a recovery ‘faster and lasting’ than initially feared, with the economy reaching its pre-Covid position in mid-2022, six months earlier than expected.
Economic growth is expected to reach 4.6% this year and 7.3% in 2022, although the Chancellor conceded that the economy in 2026 will be 3% smaller than it would have been if the pandemic had not. not hit.
Time off to run until October
As expected, the Chancellor extended the “on leave” job retention program until the end of September. For employees, the terms will remain unchanged, with 80% of wages being paid for hours not worked up to a cap of £ 2,500 per month.
Conditions for employers will also remain unchanged until the end of June. However, from July, companies will have to contribute 10% of the costs, which will rise to 20% for August and September. Employers already have to pay the costs of pensions and national insurance.
According to government figures, the leave scheme has plugged the wages of more than 11 million workers since its introduction almost a year ago, with a total of £ 53.8 billion claimed.
Extended and extended SEISS
An additional 600,000 self-employed workers will be eligible for the Self-Employed Income Support Scheme (SEISS) with the relaxation of eligibility criteria by the Chancellor.
A fourth SEISS grant, covering February through April and worth 80% of average three-month business profits, will provide a maximum of £ 7,500, which will be paid out in one go. Cash can be claimed from the end of April.
To be eligible, you will need to have filed a tax return for the last tax year (2019/20). This means that, unlike previous SEISS grants, it extends to more recent freelancers. All other eligibility criteria will remain the same as for the third grant.
A fifth (and final) SEISS grant, covering the months of May through September, will then be available to those who “need it most” as the economy begins to reopen. It can be claimed from the end of July.
The value of this fifth grant will be determined by a “ turnover test ”:
- If your turnover has declined by 30% or more, you will continue to receive the full grant (worth 80% of average three-month trading profits, capped at £ 7,500)
- If your turnover has fallen by less than 30%, you will receive a 30% grant, capped at £ 2,850.
More details will follow. To date, SEISS has supported 2.7 million self-employed workers with claims totaling £ 19.7 billion, according to government figures.
There was no announcement in the budget speech about extending the assistance provided under SEISS to other “ excluded ” groups, such as independent business leaders who pay themselves through dividends and those who have previously declared annual profits over £ 50,000.
The Trésor unveils a “ high street ” support package
The budget also contained details of a £ 594million discretionary fund to be made available to support other affected businesses.
The money is expected to benefit more than 600,000 commercial properties, worth a total of £ 4 billion across the UK.
Non-essential retail businesses will be eligible for restart grants of up to £ 6,000. Hospitality and leisure businesses, including personal care businesses such as hairdressers and salons, will be eligible for grants of up to £ 18,000.
The 100% vacation rates for retail, hospitality and leisure businesses will remain in effect until June 30. A two-thirds reduction will remain in effect for the remainder of the 2021/22 tax year.
The reduced 5% VAT rate for tourism and hotels will be extended by six months until the end of September, when it will rise to an intermediate rate of 12.5% for the rest of the year before returning at 20% next April.
Personal income tax allowance frozen from 2022
Everyone has a personal income tax allowance – this tax year (2020/2021) it’s £ 12,500 meaning you can earn that much in the year before you start paying taxes at 20%.
If a person’s income reaches £ 50,000 a year, they start paying 40% tax on anything they earn above that amount.
The amounts will increase in April 2022 (to £ 12,570 and £ 50,270 respectively) but after that they will remain frozen until 2026.
This has the effect that anyone who has a raise in pay will see a greater proportion of their earnings fall outside their personal allowance, which means they will pay more tax. But the chancellor said no one will see a reduction in their take-home pay as a result of the change.
There will be no change in the thresholds or allowances relating to inheritance tax and capital gains taxes until 2026 at the earliest.
The Lifetime Pensions Allowance – the amount of benefit that can be taken out of pension savings without incurring an additional tax burden – is also valid for five years at the current level of £ 1,073,100. It was expected to be reduced
Franchised property tax until June
Stamp duty / property tax exemptions were introduced in July 2020 to support the housing market.
In England and Northern Ireland, buyers were granted a tax exemption on the first £ 500,000 of any residential property transaction, saving them up to £ 15,000. These holidays were supposed to end in March, but they are now extended until the end of June.
In Scotland and Wales, the exemptions, when introduced last year, applied to the first £ 250,000 of the property’s value.
The zero rate bracket applicable to the Wales land transactions tax will now apply until June 30.
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New program to help homebuyers with a 5% down payment
The Chancellor also unveiled plans for a new mortgage guarantee system, designed to help all homebuyers who can only collect a 5% down payment.
The government will provide a guarantee to mortgage lenders to encourage them to lend 95% mortgages, which have almost entirely disappeared since the start of the Covid pandemic.
The scheme will apply to new and existing homes in England up to a maximum value of £ 600,000.
Santander, Lloyds, HSBC and NatWest are expected to announce loans that meet these criteria in the coming days and weeks, with Virgin Money also working to bring a product to market.
Frozen fuel and alcohol rights
Perhaps demonstrating his ability to “read the room” and not impose hugely unpopular tax hikes, the Chancellor refrained from increasing duties paid on fuel or alcohol on vehicles.
The government says future fuel tariff rates will be seen in the context of the UK’s goal of achieving net zero carbon emissions by 2050.
The budget also announced a £ 4.8million investment in a hydrogen hub in Holyhead, Wales to pilot the creation of hydrogen from renewable energy and its use as a zero-emission fuel. for heavy goods vehicles.
Another £ 4million will fund a biomass feedstocks program. This will explore ways to stimulate the production of environmentally friendly crops and other cultivated products that can be used for energy production.
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Contactless spending limit increased to £ 100
Last year the government announced an increase in the limit on contactless debit card transactions from £ 30 to £ 45 with the idea that this would make more transactions faster and more hygienic.
The budget confirmed that following a public consultation by the Financial Conduct Authority, the limit for one-off contactless payments will increase again to £ 100.
Customers will be able to make cumulative contactless payments of up to £ 300 without having to enter their chip and PIN.
The government says it expects the banking sector to apply the new limits later this year.
Extension of extended universal credit
The current universal credit increase of £ 20 per week will continue for another six months until the end of September.
Labor tax credit (WTC) applicants will receive equivalent support during the same six-month period in the form of a one-off payment of £ 500.
Government figures show that there were six million people receiving universal credit on January 14 of this year – that’s double (a 98% increase from three million) of the number on March 12, 2020, few long before the introduction of the first lockdown and social restrictions to tackle the coronavirus pandemic.
The number of people claiming the WTC at the end of 2020 has declined from a year earlier. According to government records, 1.99 million families were claiming the WTC and / or the Child Tax Credit (CTC) on December 2, 2020, which is 492,000 fewer than in December 2019.
To be eligible for the tax credit for work, you must already be receiving the child tax credit. You must also work a certain number of hours per week:
· 25 – 59 years old: At least 30 hours
· 60 years or older: At least 16 hours
· Disabled: At least 16 hours
· Single with 1 or more children: At least 16 hours
· Couple with 1 or more children: Usually at least 24 hours between the two of you with someone working at least 16 hours.
If you are self-employed, you must work for profit, and your work must be commercial, regular and organized.
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