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The Budget 2021: A Summary

 The Budget 2021: A Summary

After perhaps some of the toughest challenges in a single year, it became obvious early on that even a global pandemic wouldn’t be able to shake the UK property market, at least not in a negative way. Nationwide’s house price index has revealed UK house prices rose by a staggering 7.3% during 2020, which is a six-year high. This confirmed the UK property market’s position as one of the strongest and most promising hotspots in the current competing economy.

As we steamed into Q1 2021, the market showed no signs of slowing down. Strong demand and house price growth have continued through the beginning of 2021, with the stamp duty holiday hailed as one of the reasons for this strong start. But as buyers and sellers alike began to let the opportunity slip away, there was lingering hope to come in the form of the Budget announcement for 2021. As we anxiously awaited and held our breath, finally, on Wednesday 3rd March at 5pm, Chancellor of the Exchequer, Rishi Sunak, made the national announcement. Covering many things, from predictions of when the UK economy is expected to return to pre-covid levels, to the allocation of 45 new public investment “town deals” across the country.

Whilst UK budget plans and dreaded cuts have long been a bone of contention for investors worldwide, we’ve got good news for you. The economy is expected to return to pre-covid levels by the middle of 2022, six months earlier than previously estimated, and a huge range of business and personal support was included in the announcement.

Here’s everything you need to know:

Business Support

Ongoing business support sees companies offsetting losses against their tax bills, and incentive payments for hiring new apprentices are being doubled. A staggering £126bm will be invested to triple the number of new traineeships, which is great news for businesses.

“Help-to-grow” schemes will see small businesses receive management and digital training, ensuring the security of current and future start-ups. Up to 130,000 companies across the UK are set to benefit. A review of the current 8% bank surcharge is to take place, to ensure the rate remains sustainable and that the sector remains “internationally competitive”. Meaning, our investors are able to rest assured their properties sit comfortably within an economically stable and regenerating economy.

The ‘Super deduction’ scheme has also been implemented to incentivise business investment. The new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment. This is worth around £25 billion to UK companies over the two-year period the super-deduction will be in full effect. Under this new scheme, investors in certain sectors can reduce their taxable income by up to 130% of the amount they invest.

Making capital allowances more generous works to stimulate business investment. As a result, these measures can promote economic growth and counter business cycles. The super-deduction will also give companies a strong incentive to make additional investments, and to bring planned investments forward, propelling the nationwide economy.

Hospitality

Possibly the sector hardest hit by the pandemic, however, hospitality is set to flourish during the Summer of 2021 thanks to the fiscal support extended to the end of June 2021. Further good news to this sector, business rates are to be reduced the remaining nine months of the year, discounted by up to two-thirds, up to a value of £2m.

Small businesses can also benefit from a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England will help to keep this sector prospering, providing the cash certainty they need to plan ahead and safely relaunch trading over the coming months.

The last year has seen restaurants, fitness & well-being, tourism and small business closures nationwide. So the business rates holiday has come at the perfect time. A further £5bn has been allocated for grants of hard-hit-firms, keeping businesses in these areas afloat until such time as they can begin to reopen.

All combined with the reduced rate of 5% VAT for the hospitality and tourism sectors until the end of September, (and will only go up to 12.5% after that, before returning to 20% next April.) means regenerating cities are expected to return to pre-covid levels.

Tax & Investments

Eight new freeports have been announced at; East Midlands airport; Felixstowe and Harwich; Humber; Liverpool city region; Plymouth; Solent; Thames; and Teesside.

Each freeport will have different zones and set rules in order to make it cheaper and easier to do business.

The first ever UK Infrastructure Bank will be set up, in Leeds, with an initial capitalisation of £12bn – to finance public and private sector “green industrial revolution” projects.

Personal income tax thresholds will be frozen from next year until 2026 – at £12,570 for the basic rate and at £50,270 for the higher rate, pensions lifetime allowance and capital gains tax thresholds are also being frozen.

Rules will also be changed to allow pension funds to plough billions into innovative new ventures, in line with a review by Lord Hill, to encourage more companies to float in London and so, visa reforms are being introduced to make it easier to attract the “best and most promising international talent” in science, research and tech.

Furlough Scheme

The furlough scheme will be extended for a further five months from May until the end of September 2021. Employees will continue to receive 80% of their salary, keeping thousands of households employed. Also, there will be no employer contributions beyond National Insurance contributions (NICs) and pensions required in April, May and June. As the economy reopens, the government will ask businesses for a 10% contribution from July, extended to 20% in August and September. This will provide a much needed boost for all business sectors.

Self-Employed Support Scheme

To support the self-employed across the UK through the next stage of the pandemic, the government confirms that the fourth SEISS grant will be made available in April, and a fifth grant in July. Some 600,000 more people who filed a tax return in 2019-20 are now able to claim for the first time, which will provide huge relief for those who have experienced financial difficulties during 2020.

Corporation Tax

Corporation tax is set to make a huge jump from 19% upto a whopping 25%. As an investor looking to hold your portfolio within a company structure, you may be gasping. However, it’s only an extreme minority of investors that will be impacted by this tax rise. Profits below £50,000 will remain at 19%. And between £50,000 and £250,000 there will be a gradual introduction tapering of the tax, with the guideline bands yet to be announced.

Finally, Property.

This has possibly been the most impactful budget for the property market, which is really game changing stuff. The growth predictions have been played fairly safe and the boost to property prices will be much more than anticipated. The market is much more stable than in 2020 and is only going to get stronger. Interestingly, capital gains tax was not mentioned in the announcement, and this lack of news can only be seen as a positive thing. This may well be introduced later, but for now it’s good news.

There was also excellent news for first time buyers, Mr Sunak confirms that the government will guarantee 95% mortgages to help those who can only afford a 5% deposit!

Stamp Duty

Finally, we’ve all been on the edge of our seats, with rumours of stamp duty holiday extensions of every investopedia page out there. It has been confirmed, the stamp duty holiday on properties worth up to £500,000 will be extended from the end of March until the end of June! If you were thinking about jumping on the bandwagon during the first stamp-duty holiday announcement and missed the chance, now is the time!

From June there will be a phased introduction of the tax, with no duty on homes worth up to £250,000 for another three months. After that, the threshold returns to the usual level of £125,000 from October.

Have stamp duty queries or need help capitalising? Click here to speak to one of our agents today!

Rebecca Smith

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