On Wednesday, 3rd March, Chancellor Rishi Sunak delivered his second Budget in the House of Commons, detailing the government’s tax and spending plans for the year ahead. His plan was divided into three parts hoping that this can address the current issues facing jobs and livelihoods whilst setting out plans to fix the public finances and building for the future economy.
TBOS shares our feedback on the Budget 2021…
PROTECT JOBS AND LIVELIHOODS
- The current furlough scheme due to end on 30th April 2021, has been extended to the 30th September 2021, with employees receiving 80% of their wages
- Businesses taking advantage of the furlough scheme will be asked to contribute towards the scheme from July with a 10% contribution and a 20% contribution from August onwards
- The National Living Wage will increase to £8.91 from April 2021
- Every company will be paid £3,000 for every new apprentice hire they take on
- A new Recovery Loan Scheme will be launched where businesses can apply for a loan between £25k to £10m; the government will back 80% of the loan. This scheme will be available until December 2021
- The Business Rate holiday available for retail, hospitality and leisure will continue until the end of June 2021 and then discounted by 75% until the end of the year
- The 5% VAT rate for the hospitality and tourism sector will continue until 30th September 2021 with a further interim rate of 12.5% for an additional six months after that
- Stamp Duty will remain at the nil rate band on properties up to £500k until 30th June 2021. The banding will then be reduced to £250k until September 2021 and then £125k after that
- A new Mortgage Guarantee scheme will be available by offering 95% mortgages guaranteed by the government
These plans will help support the jobs market, especially with the extension of the furlough scheme to avoid mass unemployment and the increase in the national living wage. Recruitment businesses will not see much benefit from the extension of the business rate holidays or the reduction in the VAT rate. However, if agencies require additional funds, then the new Recovery Loan scheme will be available to replace the CBIL’s and Bounce back loans. Lastly, the extension of the nil rate band on stamp duty will allow people to get on the property ladder and help the housing market to grow.
FIX PUBLIC FINANCES
- There will be a freeze on personal tax thresholds, with the only increase occurring in April 2022, where the tax-free allowance will increase to £12,570, and the higher rate allowance will increase to £50,270 until April 2026
- IHT, Pension Allowances, Capital Gains Tax and VAT thresholds will all stay the same
- A new HMRC Taskforce will be created to investigate fraudulent furlough claims and tax frauds
- Corporation tax rates will increase from April 2023 from 19% to 25%. However, companies making less than £50k in profit will still only pay tax at 19%, and there will be a tapered rate of up to £250k
- Companies with tax losses up to £2m will be able to carry back losses over three years
- A new Super Deduction tax relief scheme to spur business investment by providing 130% first-year capital allowance in machinery and plant
- Alcohol duties have been frozen, and the fuel duty has been cancelled
There was very little change to the current tax regime, with the only change being the Corporation tax increase coming in two years. This shows the government is banking on a bounce back in the economy once we come out of this pandemic to repay the public finances. The investment in the new HMRC Taskforce looks like they are trying to find companies/individuals who are committing tax or furlough fraud. The Super Deduction tax relief scheme may mean agencies want to bring forward their investment in computer equipment over the next two years. With the freeze on alcohol duties, this should help to celebrate the return to the pub as we come out of lockdown.
BUILDING FUTURE ECONOMY
- £12bn investment in the green industry with the launch of the Infrastructure Bank in Leeds
- 750 civil service jobs to be relocated to new Treasury Campus in Darlington
- The launch of “Help to Grow” schemes which include “Help to Grow Management” providing training for executive development and “Help to Grow Digital” providing training on digital technology for businesses
- Visa reforms to attract International talent for the technology, research and scientific sectors
- Creation of 8 “Free Ports”, which are special economic zones with different rules which will make it easier to do business
These investments in infrastructure projects across the UK will help boost the economy and move us towards our carbon-neutral target by 2050. Agencies who recruit into industries that are getting this government support can expect an increase in contract and permanent placements. The visa reforms will also help agencies find additional candidates to fulfil their clients’ positions within those sectors.